Home General The Psychology of Crypto Trading – Facts You Should Know

The Psychology of Crypto Trading – Facts You Should Know

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The ease with which we can access tools like e-wallets and exchanges these days has resulted in the entry of many new traders in the industry. However, not everyone is aware of the intricacies of this activity, especially when it comes to crypto trading. It is often the psychology of the trader that determines their success in this field.

As crypto trading exchanges continue to hire experts and expand services, evolving from simple converters into actual trading platforms, with complex tools to carry out different operations, and the ability to set up different order types, this industry is definitely receiving a lot of action these days. 

How to succeed at crypto trading

Regardless of whether it is about crypto, stock or forex, there is a common component that unites traders in all these commodities – that 95% of them lose money. Mark Douglas examined the deeper psychological aspect of traders in his famous book Trading in the Zone highlighting the different mechanisms which get triggered in their minds, and play a key role in their failures or successes.

All traders know that there is a good amount of risk involved in this activity, the reason why crypto trading is likened to gambling too. But they often approach it with the mentality of being unprepared about the end result, which could be both positive and negative.

So what’s the key to succeed in this profession? Thorough technical analysis, fundamental analysis or simple psychology? All aspects are important and a good strategy should incorporate each one of them. As per Douglas, failure is usually a result of fear among traders, and has a big role to play in the position they take while trading, their psychology as well as the chances of making mistakes.

How to get rid of fear?

The harsh reality when it comes to trading is that if you want to show consistency in your results, you must respect the rules, whether you gain or lose. People have a tendency of taking credit for the winnings even when they trade without any well-defined plan. On the other hand, they start blaming others when they face losses. Risk acceptance is about taking responsibility of one’s actions without getting too involved, without any fear or emotional discomfort.

Growth of equity

The lack of growth in an equity curve is the same as lack of regulatory elements. For instance, if you go with a reasonable 2% equity risk for every trade, you can set a fixed ‘stop loss’. Such approach allows for being aware of the maximum loss you can incur, before entering into the market. In the same way, you should view ‘take profit’ as the minimum objective, else there will be a big risk of early closure of the position, leaving considerable gains on the table.

Regardless of what the situation may be, when it comes to a market like cryptocurrencies, the trading actions shouldn’t be influenced by psychology. Hence, nowadays it’s the software which has taken over and performs the actions which earlier used to be taken by human beings, thereby getting rid of the component that can potentially make mistakes.


Helen Bradfield did her degree in psychology at the University of Edinburgh. She has an ongoing interest in mental health and well-being.

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