Only when conducting objective market sentiment analysis should the behavior of the public be considered.
Article by Koroush AK
Translation by TechFlow
Your biggest trading mistake is not technical, but psychological errors, these biases have destroyed countless traders.
Avoid at all costs:
1. Anchoring Bias
Traders focus on one price (anchor) that can influence their decisions.
If trader A enters cryptocurrency when the BTC price is $52,000, then BTC at $61,000 seems expensive.
If trader B enters cryptocurrency when the BTC price is $71,000, then BTC at $61,000 seems cheap.
2. Recency Bias
This is the tendency to have the deepest memory of and give importance to the most recent information.
Traders may carry information from recent trades into the next trade, which can lead to overconfidence and losses.
3. Loss Aversion
Traders feel losses more strongly than gains.
The pain of losing $100 may be greater than the joy of earning $100.
This bias can lead traders to prematurely abandon profits because they fear those gains will turn into losses.
4. Endowment Effect
When traders hold an asset, they tend to overvalue its worth.
This emotional attachment makes it difficult for them to sell at a loss, and even difficult to sell at a fair price because they rely more on their own expectations rather than the actual market conditions to judge the future price of the asset.
5. Herd Mentality
There are risks in blindly following or deliberately going against the crowd.
Stick to your own trading plan and avoid impulsive actions based on the behavior of the masses.
Only when conducting objective market sentiment analysis should the behavior of the public be considered.
6. Availability Heuristic
Traders tend to give excessive weight to emotionally intense or recently occurring information.
For example, even if market conditions have changed, a recent market crash may make traders overly cautious.
7. Survivorship Bias
Systematically overestimating the probability of success.
We often only see successful stories while forgetting about the stories of failure.
8. Framing Effect
The way information is presented can influence decisions.
Traders’ emotions and confidence can affect their risk assessment.
Positive emotions can lead to underestimating risk, while negative emotions can lead to overestimating risk.
9. Confirmation Bias
Traders tend to look for data that supports their beliefs.
If you are bullish on an asset, you will look for all the information that supports the rise of that asset, while ignoring bearish data.
10. Captain Hindsight
In hindsight, everything seems obvious.
After an event, traders often feel that they had already anticipated the outcome.
This bias can lead to overconfidence in future predictions and unrealistic expectations of one’s trading abilities.
Tags:
Market
Bitcoin
Market sentiment
Source link:
https://www.techflowpost.com/article/detail_18870.html
Note: The opinion expressed in this article represents the author’s viewpoint and does not constitute investment advice.
Original article link:
https://www.bitpush.news/articles/6919241
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