Avoid the leek mentality: 3 suggestions for cryptocurrency investors

Article Introduction:

1. Have a clear plan and strategy before investing

2. Don’t try to guess short-term market trends

3. Avoid the leek thinking solution

Yesterday, a reader asked me that he bought EOS at 58 yuan, and it should have fallen to around 50 yuan at that time. He was worried whether it would continue to fall and whether he should sell it and wait until the price fell before entering the market. Today I would like to share my thoughts on this issue with you in detail.

This mentality is common among new investors. Let's take a look at the root cause of this mentality.

1. Have a clear plan and strategy before investing

Let’s look at the first question first: “Will it fall in the short term?”

Generally speaking, most investors who immediately care about whether the stock price will rise or fall after buying do so for the following two reasons:

One is that they have a speculative mindset and want to make a quick profit in the short term;

Second, before buying, he was not sure whether he should buy the coin at this price, but bought it because of external factors. So once he bought it, when the price of the coin fluctuated or fell, he began to get nervous, not sure whether it would rise or fall next, and worried about losses caused by falling prices, so he began to wonder whether to sell it.

Regardless of the reason, the root cause is that investors do not have a clear investment strategy and a clear plan before entering the market, so once the market development is different from what they expected, they become at a loss.

For a mature investor, whether he is doing short-term or long-term investment, he will have a clear plan before entering the market and will not have such entanglements.

If he is doing short-term trading, when he places an order, he will definitely set a stop loss and a take profit. It does not matter whether the future price is high or low. As long as the stop loss or take profit level is reached, he will sell. If the price does not reach this level, he will continue to hold it.

If he is making a long-term investment, he will definitely set a suitable buying price and selling price before buying. He will not enter the market unless the buying price is reached. Once he enters the market, he will only care whether the price has risen to his selling price. If it has not reached, he will not sell. As long as the price is still within his buying price, he will continue to invest. Therefore, the short-term rise and fall of the coin price after buying is not important to him.

2. Don’t try to guess short-term market trends

Let’s look at the second question: “Sell and wait until the price drops before entering the market?”

The question is: when you plan to sell, how do you know that the price will definitely fall after you sell? Even if it does fall, when will it fall? Do you really have the patience to wait for it to fall? If it does fall, at what price do you plan to wait before buying?

When investors buy rashly due to the above two reasons, they will be affected by the market situation. The more volatile the market is, the more they cannot see the direction, and the more they want to find a reason for their next investment behavior. So they start to predict the market situation based on assumptions.

When the currency price starts to fall, you imagine that it will continue to fall and can't help but want to sell to stop the loss. When the currency price rises, you imagine that it will continue to rise and can't help but want to continue to increase your position.

At this point, investors' behavior is no longer rational but becomes driven by market conditions.

In fact, in many cases, when investors sell their coins and the price really falls, investors will become even more panicked, thinking that it will continue to fall, so they will not buy it back when the price is low; instead, after the price rises and everyone is chasing it, they will follow the trend and buy at a high price.

3. Avoid the leek thinking solution

To completely get rid of this mentality and situation, the fundamental solution is two points:

First, clarify the strategy and make a clear plan before investing.

Second, do not speculate on market changes based on emotions. After entering the market, no matter how the market changes, as long as it is in line with the previous plan, you must overcome your inner fear and greed and strictly implement the plan.

For example, you need to formulate an operation strategy in advance, such as deciding to sell to stop loss if the price drops by 20%, and sell to stop profit if the price gains by 20%. When you buy EOS at the price of 58 yuan, then a 20% drop from 58 yuan is about 46 yuan, and a 20% profit is about 70 yuan.

At this point you will have an idea in your mind. The worst-case scenario is a 20% loss. As long as the price does not fall below this level, you don’t have to worry about it. The same applies to profits. This way, you will not have fear or anxiety because you know what is going on.

Of course, the 20% mentioned here is based on each person’s specific situation. A 20% profit stop-loss is considered a short-term operation in digital currency investment. If it is a long-term investment, it may be calculated in multiples. This is why investing in digital currency is extremely risky, but also has high returns.