What are the best ways to manage crypto trading fear?

Since its beginning in 2009, the market for cryptocurrencies has seen several peaks and valleys, even within the larger patterns known as bull and bear markets, which tend to persist over longer time periods. Downturns in the market may be upsetting and challenging to manage, regardless of whether an individual is an experienced trader or a beginner investment. Visit multibank

Traders often experience sentiments of anxiety and greed, both of which, if allowed to continue uncontrolled, may lead to disastrous outcomes. When traders feel fearful, they may be hesitant to initiate a transaction or may rush to complete a contract that may have been advantageous. On the other hand, gluttony manifests itself when investors over-leverage their holdings to capitalize on very small price fluctuations. Both greed and fear have their origins in the common human urge to live, which may be seen as the driving force behind both emotions.

Read more: Bitcoin exchange rate history

When trading cryptocurrency or even if the market is falling, following these tips will help you avoid trading based on your emotions, maintain the value of your portfolio, and get enough sleep.

Do not give in to the FOMO and FUD

Although it is essential to keep up with the most recent bitcoin news and trends, it is possible to get an overwhelming amount of information, which may be a problem. This is particularly important to keep in mind during market downturns, when it's all too easy to let your instincts get the better of you and make some transactions at the wrong moment.

The phrases "fear of missing out" (FOMO) and "fear, uncertainty, and doubt" (FUD) are often used in the cryptocurrency industry. These emotions may have a more significant impact on our decisions to purchase and sell cryptocurrency than many of us would like to acknowledge.

FUD is an abbreviation that stands for "fear, uncertainty, and doubt." This is a term that is often used to describe a pessimistic market attitude that is brought on by a rumour, an unpleasant news story, or a notable individual voicing worries about a certain market or asset The expectation among traders that prices will continue to fall causes some of them to sell their holdings, which may have a negative impact on the price.

On the other hand, fear of missing out, or FOMO, refers to a trader's propensity to get carried away with wishful thinking after seeing positive price action or news, sometimes overlooking fundamental signals in their haste to board the next rocket ship to the moon. FOMO is the opposite of a trader's ability to identify and manage risk.

POINT TO BE NOTED

Keep in mind that no one can see into the future, and that following the counsel of any one person is not as valuable as doing your own investigation and drawing your own conclusions. Influencers and publishers may in fact have a vested interest in producing fear, uncertainty, and doubt (FUD) or fear, uncertainty, and anticipation (FOMO) to move markets in a certain way. Always try to authenticate information obtained from different sources while studying the most recent developments pertaining to cryptocurrency markets.

Read more: Which crypto is best for staking?

Make your objectives crystal clear, diversify your holdings, and don't invest more than you can afford

You should never invest more money in a specific asset than you can afford to lose, regardless of how convinced you are that you will make a profit from the investment. The last thing that anybody wants is to find themselves stuck on an emotional rollercoaster while hoping for favourable market movement as the value of their portfolio gradually decreases.

When it comes to diversifying their portfolios, most astute investors opt to hold a variety of various types of assets over the long term. These assets might range from alternative cryptocurrencies to stock market index funds.

It is often believed that cryptography never stops working. The volatility of cryptocurrency markets is well known, and for cryptocurrency investors to protect themselves from this volatility, they need predefine their trading methods and, if at all feasible, their entry and exit locations.

Even if you had access to every piece of information that is currently accessible, an unexpected black swan incident, hack, or tweet from a prominent person may cause prices to suddenly drop. Because of this, it is very necessary to prepare in advance and to take measures to lessen the impact of any unexpected setbacks that may arise.

The use of fixed strategies, such as dollar-cost averaging (the process of buying or selling cryptocurrency in small amounts at regular intervals), could help investors completely avoid trading with their emotions, as well as the need to stare at the charts around the clock. These strategies could be considered by investors.

POINT TO BE NOTED

Keep in mind that it is quite simple to let emotions get the better of you while owning volatile investments such as cryptocurrency. Trading may be a highly high-risk activity, particularly when the market is falling, and investors should strive to develop objectives that strike a balance between reducing possible losses and maximizing potential returns.

HODLing as well as long-term thinking and planning

Although the proverb "it's not a loss until you sell" is only partly accurate, there is some merit to the idea that it should be followed. If the value of your assets has decreased after you acquired them, which results in unrealized losses, those losses won't be recognized until the assets are sold at a price that is lower than what you paid for them.

The crypto exchange rate has on average and over the course of several years, moved steadily higher in the long run. Even if prices are falling because of a temporary market correction or a longer bear market, historical evidence indicates that prices are likely to recover eventually due to economic drivers such as scarcity. This is the case even if the market correction is temporary or the bear market is longer.

Many individuals are of the opinion that the limited availability of cryptocurrencies such as Bitcoin will cause their prices to continue to escalate over the course of time. When your horizon for investing is on the longer side (years as opposed to weeks or months), it is possible to interpret downward price movement as being transient rather than permanent.

Read more: What Are NFTS and Why Are They Popular?

Over the course of the last decade, cryptocurrency has emerged as possibly the most successful large asset class, and one technique that has been shown to be beneficial is holding for extended periods of time.

POINT TO BE NOTED

Keep in mind that in certain countries, such as the United States, there are tax advantages associated with keeping cryptocurrency holdings for extended periods of time. Keeping an asset for a period of twelve months or longer rather than selling it quickly might be more profitable, for instance.

Prepare yourself to either ride out the downturn or extract some gains

Converting part of your risky cryptocurrency holdings into more stable assets is one of the most reliable strategies for avoiding the volatility of cryptocurrencies and safeguarding yourself during a downturn in the market. In a bull market for cryptocurrencies, this may be helpful to an investor in that it can help them "lock in" their balance, reducing their risk and the need to actively manage their portfolio as well as their stress levels.

However, keep in mind that selling everything at once, a strategy known as capitulation, might easily lead cryptocurrency investors to miss out on potential profits if the market quickly recovers. Because of this, prior to being put in a position where you are forced to make judgments under pressure, it is very crucial to sketch out an idea of what degree of profit and loss you would be happy with.

POINT TO BE NOTED

Keep in mind that many investors opt to move into and out of solid assets today as part of a bigger plan that involves withdrawal and buyback, which may help steadily expand their portfolios if the time is right. However, this is not a simple task, and even the most experienced traders sometimes make mistakes when trying to time the entry and exit of their positions.

Consider the possibilities

Even when cryptocurrency markets are experiencing a downward trend, there are chances to be had if one knows where to look. When most people look at the cryptocurrency market, they see a long, bleak winter, but astute investors perceive a fresh window of opportunity to buy their preferred assets at a bargain and make a profit.

• "Buying the dip" is a common strategy that traders use to get into the market or boost their holdings when they feel that they have been priced out of prior gains. 

• Although the market is moving in a downward direction, there will still be several little peaks and dips. Traders who have recently brushed up on their abilities in technical analysis have a good chance of benefiting from this situation. With this information, traders can use it to forecast short-term price fluctuations and profit from them by buying the short-term lows and selling the short-term highs.
• Short selling, often known as wagering, that the value of an asset will decrease, is another profitable approach that may be used during down markets. 

• Staking and DeFi yield farming are two examples of activities that may further assist in evening out returns and give support to ensure that your real cryptocurrency balance is continually rising, even during a weak market or a decline.
• If you think the value of an item will increase over time, dollar-cost averaging is a strategy that will work for you whether the market is going up or down. You may purchase more cryptocurrency for the same amount of dollars during down markets.

POINT TO BE NOTED

It is important to keep in mind that those who are easily scared should not participate in these sorts of activities since they might potentially result in big losses. They will, at the at least, drastically increase the amount of time you spend in front of a computer viewing anxious price charts. They will do this by increasing the amount of time you spend trading.

Read more: What is the future of cryptocurrency?

The Bottom Line

To trade cryptocurrency and to trade well, it is vital to keep your emotions under control. As a psychological aim, traders may often shoot for a set amount of pip gains each trading day. Maintaining a trading log can help you remain on track with your own trading plan. Trading is a very risky endeavour that requires a significant amount of conviction.