You might have already noticed that whenever I talk about the crypto market I often suggest to stay on the safe side and not chase big profits.
My philosophy is quite simple:
It’s better to under profit than overshoot! (just getting less profit instead of dumping all money into the drain and undergoing extra loss!
As they say it’s better to make 1%, than to lose 10%.
This is what my risk management system is built on.
Of course, the way money loss is experienced is a subjective thing and can differ from trader to trader. In the crypto jungle you can get discouraged to trade in no time. And yet, it is absolutely necessary not to forget to set your stop loss and be aware of gambling addictions hidden deep within.
You can be a careful and rational trader, but still fall into the lure of the market manipulations of large players or into the trap of your own cognitive distortions.
How to prepare yourself to face a trading losses. A big No-no.
The worst of all possible options is to start panicking and try to win back in any way. The state of tilt always ends in a loss of control over the situation and, in the long run, a nervous breakdown.
Don’t panic! Remember: loss is part of any trading system. DIXI
Another, also unreasonable, option is to keep a poker face and tell everyone that your trading strategy is super fly, it just went a bit wrong but the process of making millions is in full swing. I’m pretty sure that staying stubborn and rejecting your own mistakes always leads to a deposit flushed down the toilet and a very unpleasant loss.
Don’t act mulish!
It’s absolutely thoughtless and careless to hold a position without fixing a loss. But the thing is it’s sort of a defensive reaction of the psyche: as long as the loss isn’t fixed, it seems to be non-existent. Even though the price is already rushing against you to knock you off your feet, you are still daydreaming and hoping for a reversal to happen. This “what if” state of mind is there and you hope to not lose anything that day. But it might as well be that “down the drain” type of day where you lose 30% instead of fixed 8%.
Act first to prevent your money going down the drain. Lead the game to not be devoured by it!
Facing a trading loss for real. A big Yes.
My friend, here’s a few rules to remember:
If your loss is bigger than expected, just enable a stop. From that moment on do something to distract yourself, whether it’s binge watching Breaking Bad or eating pizza with friends, anything will do. Close the trade and exhale.
Start the next day with a clean slate. Loss free. You continue trading, without looking back. All you need to do is to work only with your current deposit as if you have just deposited money on the exchange. That’s it! Nothing else matters!
Evaluate your work not in terms of current profit and loss, but in terms of the possible liquidity of assets. When closing the day, calculate the amount of deposit assets by market, as if you have no open positions. This will be your true result. This approach helps to look at things in a sober way, without falling into extremes in the form of euphoria or depression.
Don’t be fixated on the loss. The more you think about it, the less doors for potential earnings are gonna be open for you. Look for other options, analyze, stay tuned, and always keep your composure.
And last but not least – stay agile! Be free!
All you need to remember is that this game has no rules. And I’m your forever devoted guard.