As traders, all of us want to believe that we are too smart to be susceptible to emotional biases when playing the cryptocurrency market. All of us have made decisions for trading that were not rooted in stone cold logic, but rather with emotions clouding our mind and judgement.

Since it’s true that we are incapable of conquering our emotional biases, it’s imperative for success that we learn the range of emotions we cycle through as cryptocurrency investors. This is based off the common market psychology cycle that was coined for stock traders, however it applies equally to cryptocurrency traders of all skill levels. Once you understand our inherent emotional biases, you will understand how emotions affect our decisions. This is the key step in conquering the emotional rollercoaster and evolving to the next level.

The 14 Psychological Stages of Cryptocurrency Trading:

  1. Optimism: We all start out with a positive outlook that that leads us to move forward with confidence to buy.
  2. Excitement: With some initial success, we begin pondering our potential market success could Having seen some of our initial ideas work, we begin considering what our market success could allow us to accomplish.
  3. Thrill: At this point we investors cannot believe our success and begin to comment on how smart we are.
  4. Euphoria: This marks the point of maximum financial risk. Having seen every decision result in quick, easy profits, we begin to ignore risk and expect every trade to become profitable.
  5. Anxiety: For the first time the market moves against us. Having never stared at unrealized losses, we tell ourselves we are long-term investors and that all our ideas will eventually work.
  6. Denial: When markets have not rebounded, yet we do not know how to respond, we begin denying either that we made poor choices or that things will not improve shortly.
  7. Fear: The market realities become confusing. We believe the stocks we own will never move in our favor.
  8. Desperation: Not knowing how to act, we grasp at any idea that will allow us to get back to breakeven.
  9. Panic: Having exhausted all ideas, we are at a loss for what to do next.
  10. Capitulation: Deciding our portfolio will never increase again, we sell all our stocks to avoid any future losses.
  11. Despondency: After exiting the markets we do not want to buy stocks ever again. This often marks the moment of greatest financial opportunity.
  12. Depression:  Not knowing how we could be so foolish, we are left trying to understand our actions.
  13. Hope: Eventually we return to the realization that markets move in cycles, and we begin looking for our next opportunity.
  14. Relief: Having bought a stock that turned profitable, we renew our faith that there is a future in investing.

Now that you know these stages, you can begin applying them to your trades and recognizing when we or others we follow for information may have their judgement clouded by emotion.

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