It's been said that the key to successful trading is to develop an understanding of mass human psychology. But yesterday I learned a valuable lesson: You must also come to understand the workings of your own human psychology.
Being new to the world of cryptocurrency trading I laid out three basic rules for myself while learning the ropes.
1. Never invest money into a coin you know little or nothing about.
2. Never invest more than you are willing to lose.
3. Always buy low and sell high.
Yesterday I violated all three of these personal ground rules. Why? I'm going to call it Burstcoin Fever for the moment.
When I logged into the Poloniex Exchange the other day, at first I saw nothing out of the ordinary. Then I looked at the Troll Box and a few messages caught my eye:
"Burst is climbing. WTF?"
"Check out the trade volume on Burst."
"Forget XMR I'm all in on Burst."
I looked at the stats on Burstcoin and saw it was going through the roof. A thought popped into my mind: Is this the next "New Big Thing" I've been waiting for? I had doubts seeing as how it had already climbed to over +250, but slowly my own greed got the better of me. Knowing absolutely nothing about the coin except what I had read in the Troll Box, I bought myself a chunk of the action. When the market seemed to be holding, I transferred more money from my checking account into my bitcoin wallet and then into Poloniex. Over the course of the afternoon I followed my gut instinct and built up more money than what I was willing to lose into a coin I knew nothing about. Then...Burstcoin started to plunge.
During the down slide of yesterday's market, I violated my third rule of trading. After having bought high and, fearing the lose of my entire investment, I turned around and sold low. By the end of the afternoon I had lost around 25% of my initial investment. Then by that evening, when the market began to recover, I realized the mistake to participating in a "pump and dump" and saw the consequences of investing in a coin you have no knowledge of and little faith in. So, I started reading up on Burstcoin and after reading a few articles and listing to a few videos, began to develop a little faith in my investment and the gut instinct that told me to go for it.
Since yesterday afternoon I've begun the more careful process of re-investing in Burstcoin. I've also been more careful to buy low and sell high, and I am continuing to learn more about what I now feel to be a very promising coin. The next few days will tell if my gut instinct is correct, but already I have regained much of my lose from yesterday's mistakes. Hopefully by the end of this week I will have more good news to share. But this experience has taught me a valuable lesson: Be careful not to give in to your fear. It's been said, "Smart people do stupid things when they are scared." By giving into my fear and selling when I now know I should have been holding I suffered a lose I did not have to take. But I took it out of fear. From now on I plan to follow my gut instincts, do my homework before during and after making my trades, and putting the fear factor on the back burner. Coin trading is fun and exciting. From now on I plan to have fun with it and not fear the downturns as much.