Two opposites are reigning side by side over the world's financial markets: greed and fear. This ruling duo passes the scepter back and forth at lightning speed, inciting the volatility we witness -and participate in- each day.
To be sure, greed operates up and down the scale from mild optimism to euphoria. Fear varies from apprehension to outright panic. The degree to which these two emotions exert power propels stock prices upward and downward.
Further, these emotions are never spent, never exhausted. As timeless as the markets they rule, they reign supreme, fueled by their own energy.
You can watch them commanding a coin's price at any given time. For example, on a volatile morning, check the price of BTC from one hour to the next. In the morning let's say at 8am it's priced at 9.2k USDT/BTC. By midday, the price has risen to 10.2k, and on the 4h chart the candle closes at 10.6k .
Now, the BTC's fundamentals changed, or any news influenced its price during that time period? Probably not.Greed pushed the price up --greed and the resulting demand created by buyers who decided to ''pay up'' for the coin. When the price falls --and it will at some point-- fear will be the culprit. Much of the time, these two emotions rule according to perception, not logic or fundamental value.
What's this got to do with you? EVERYTHING.
Are you greedy? Sure. Are you fearful? I bet you are.
What about me? Have i never been greedy or scared?
Absolutely. Although experience has tempered these two emotions in me, there was a time when I'd happily stuff my account with high-flying coins. If (when) they tanked, I'd get scared and sell, usually at big losses.
When you first venture into the market, greed and fear will be your constant companions. Those two emotions are part of human nature. The trouble is, in large doses they color your perception of the market and urge you to make choices you wouldn't make in more rational moments. Some of those choices can be harmful to your wealth.
Greed causes us to ''chase'' the coin or to buy in the momentary euphoria by paying higher and higher for a rocketing coin or token. By the time our order is filled, the buying frenzy has nearly dissipated. Soon, the stock begins to stager south, taking our money with it.
When everyone around us is screaming that a coin is going to the moon, greed also urges us to ''load the truck''. As our good sense dissolves, we max out our accounts with this dream baby that will surely send us to a dream holiday and our family to fancy spa treatments. Unfortunately, the dream coin's overblown price will suddenly dissolve into the mist, along with our profits.
Greed convinces us to hold oversized positions in rocky markets. It spurs us to grab ICOs (initial coin offerings) on the first day they trade. It drives us to gobble up market laggards and losers ''because they're cheap''.
Greed's ruling partner, fear, motivates us to action, even more quickly. The fear of losing money reigns uppermost in our minds. Fear causes us to sell a winning position too quickly. Interestingly enough, it also causes us to hang on to a loosing position too long. When the market slaps us hard, fear stops us from capitalising on the next good opportunity, because we're afraid to get burned again.
How do you eliminate these unsavory feelings from your trading and investing decisions? By learning how to replace them with positive ones. Learn how to read market actions and reactions. Move slowly, study hard, and apply what you've learned in a disciplined, coolheaded fashion. If you can accomplish that, you'll have the edge over 99% of all market players.