The impact of the market mood on trading results in the CRIPTO currency
Crypto currencies brought titles for their volatility and unpredictability. One of the factors that plays a significant role in determining trading results is the market, which refers to the collective mood or attitude of investors according to the asset class, sector or specific crypto currency. In this article, we will investigate how the mood of the market affects the results of trading in the cryptocurrency currency.
Psychology of trading cryptocurrencies
Investors often face uncertainty and risk when buying in a new crypto currency, because there is no regulatory framework that would run their investment decisions. Market mood can significantly affect the total effects of these investments. Here are some ways in which market mood affects trading results:
- Fear and greed
: Fear and greed are two fundamental emotions that drive investors’ behavior. During a period of high volatility or insecurity, investors are prone to more cautious and prone to risk, making them buy cryptocurrency currencies at reduced prices. On the contrary, when the market is calm and stable, they can become more aggressive and willing to take higher risks.
- Feeling according to the specific currencies : Investors often have strong emotions about specific crypto currencies, such as Bitcoin (BTC), Ethereum (ETH) or Litecoin (LTC). If a certain crypto currency has strong positive feelings among investors, it can increase its price, making other cryptocurrencies less attractive to buy. On the other hand, if the feelings become negative, it can lead to a fall in prices.
- Market Meeting and sales : Market sets and sales are natural phenomena that can significantly affect trading results. During a period of strong growth or market correction, investors may become more optimistic about the potential of cryptocurrencies, leading to increased purchase pressure. In contrast, when the market experiences a significant decline, the sales activity increases, which can lead to lower prices.
- Trends and events in industry : industry trends, such as regulatory changes or partnerships with main companies, may affect investors’ feelings and trading results. For example, if a curine currency is associated with a particular industrial trend (eg biotechnological), it can attract more attention and investment.
Influence of market feelings on trading results
The market mood has been shown to have a significant impact on trading results in cryptocurrencies. Here are some examples:
- Price Volatility : Deloitte Studio found that the price of 80% is affected by the market mood. In other words, investors’ emotions play a dominant role in determining the price direction.
- risk tolerance : feelings also affect the risk tolerance among investors. When the feelings are negative or neutral, investors can be more prepared to take higher risks and invest in crypto currencies that have stronger basics.
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Mitigation of the influence of market feelings
Although the mood of the market is a significant factor in determining trading results, there are ways to alleviate its influence:
- Diversification : Diversification of your portfolio in different crypto currency, asset classes or industries can help reduce dependence on individual feelings.
- Technical analysis : Using a technical analysis and a chart form may provide a valuable insight into the market mood and help you make informed trading decisions.
- risk management : Implementing risk management strategy, such as stopping and position size, can help reduce losses and maximize gains.
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