The psychology of trading cryptocurrencies

The psychology of trading cryptocurrencies

Mastering mental strength and wellness amidst extreme volatility and cognitive biases

Article by Basel Ismail

Cryptocurrency trading presents unique opportunities because of the potentially attractive exponential returns; however, it also presents challenges due to its hypervolatility and rapid price changes.

Successful traders must cultivate a resilient mindset, strong baseline habits, and a clear understanding of risk management while considering principles from behavioral finance. My post explores the psychological aspects of successful cryptocurrency trading, the importance of mental strength and well-being, and how to achieve peak performance while managing behavioral biases. These principles have helped me tremendously in my own personal digital asset journey and I consider them to be the single most valuable skill set in every trader I meet.

What is trading psychology? What exactly does it mean?

Trading psychology encompasses the emotional components that influence a trader's decision-making process. All traders have emotional triggers to some degree. Fear and greed are the two primary emotions impacting traders, potentially leading to ill-advised decisions such as overcommitting to a single asset or panic-selling due to fear; much more on this below.

Understanding the psychology behind your decision-making will often be the difference between being a cryptocurrency trader who is lucky, and still vulnerable to volatile markets, and being a trader who can be confident to build and preserve their long-term wealth throughout the market cycle.  

In my experience as a trader and educator, I emphasize disciplined risk management and religiously taking profit on trades, and I can affirm that one of the most challenging tasks is consistently securing profits on your trades and medium to long-term investments. It's vital to grasp the intricate dance between calculated decision-making and human emotion in trading, particularly the powerful pull of greed as discussed below.

IF / THEN strategies eliminate emotion-based decision-making

The emotion of greed can often entice us to hold on to a position, hoping for higher gains as the price continues to climb. However, to trade successfully it's crucial to have a strategic plan in place before entering a trade.

I advise employing an IF/THEN perspective: “IF this particular cryptocurrency faces rejection at this resistance level, THEN it's imperative to exit the long trade quickly as the initial trading hypothesis is now void.” This mindset can considerably decrease the likelihood of incurring significant losses which would result in greatly reducing a trader’s options for subsequent set-ups.

Further, even traders skilled in technical, fundamental, and sentimental analysis can be adversely affected by an anxious mindset, which can particularly damage their portfolio in a volatile trading environment and compound the original setback.

For instance, greed might compel a trader to take an unmanaged, high-risk action, such as purchasing a cryptocurrency at its peak due to its rapidly increasing value, exactly like what we’ve seen happen at each impulsive run-up in November 2013, December 2017, April 2021, November 2021, and even as recently as a few days ago! Subsequently, fear might cause a trader to exit the market prematurely due to being over-exposed to risk.

Fear of missing out (FOMO)

The Fear Of Missing Out (FOMO) is especially prevalent when an asset experiences substantial value appreciation within a relatively short timeframe. I have found that the best way to eliminate this, or at least, reduce the power of it, is to follow a disciplined daily routine and stick to the plan I made.

For example, if you see a micro-cap and small-cap rapidly spike in price and you missed the initial opportunity, identify target levels (specific price points) that you would like to ideally accumulate at, and patiently wait until they are hit. The dynamic cost average (DCA) into a position meaning that you would first decide how much capital you would like to allocate to this particular position e.g. $10,000, then split it into three DCA into price points, the lower the asset falls, the more capital you deploy to the target levels you identified.

If the asset price never reaches any of your target levels, it’s completely fine, you can redeploy that capital to the next opportunity. It’s very important to remember that there will ALWAYS be another train to catch. However, giving in to FOMO might mean the losses you might incur on an irrational trading thesis reduce or prevent your ability to trade that next opportunity.

Do not get enamored with any one particular trade and my advice is not to dwell on it too long because it will distract you from finding the next trading opportunity to pursue. I remember how I felt frustrated for not buying more LINK at $0.12 in 2017, but I remind myself that I should still be happy I even entered that position that early!

This is particularly true in this nascent market (denoting novel, new, and emerging cryptocurrencies), as liquidity is relatively low, bid/ask spread rates are considerably higher than the norm, and funding rates are somewhat unpredictable, therefore, the total transaction is quite difficult to forecast accurately. This phenomenon can prompt individuals to make market decisions based on emotion rather than rationality and reason.

Understanding losses

Emotion affects every trader. Generally, losing money is a painful experience while earning money elicits joy. It doesn’t need to be more complicated than that. This is called the loss aversion theory and it is a key concept in behavioral economics, which suggests that people feel the pain of losing more intensely than they experience the pleasure of securing a gain. This is particularly relevant during bear markets.

I have provided the examples above to highlight the importance of understanding trading psychology. Questions, comments, and sharing your experiences below are categorically welcome. I will write additional posts on the specific psychological principles mentioned in the future. However, for now, we will focus on ways to categorize and understand the challenges faced by cryptocurrency traders.  

The unique challenges of cryptocurrency trading psychology and behavioral finance

In this section, I will define the distinct challenges that cryptocurrency traders face due to the market's hypervolatility and the influence of behavioral biases on decision-making. I will highlight the importance of emotional control, rapid decision-making, and effective stress management in your plan to overcome these challenges.

Emotional control

Heightened volatility in cryptocurrencies requires traders to maintain emotional control to avoid impulsive decisions driven by fear or greed. In order to be successful, cryptocurrency traders need to recognize and overcome behavioral biases such as loss aversion and overconfidence to maintain objectivity and make rational decisions.

Even more importantly, drawing from my experience trading this asset class I can tell you that following the crowd seldom yields the results that you aspire to. Human beings have evolved within the framework of communities, relying on collective strength for survival. Look at trading, for instance. Novel ideas are often initially dismissed, resisted, and eventually embraced. Along with understanding your own internal psychology and employing strategies to address issues and promote successes, trading requires you to understand and process the influence of other people’s opinions while maintaining emotional control.

Only a handful dared to invest in Bitcoin when it was valued below $1,000, and even fewer when it was under $100. Yet, many jumped on the bandwagon when the price soared over $10,000. Why? Why wait for endorsement from industry leaders or any other influential figure to take a risk and deviate from the norm? This innate instinct to conform remains deep-seated within us, influencing our actions more than we might realize, often leading to predictable errors in our logic and copying others' behavior on a temporary basis.

Understanding cognitive biases and keeping an open mind

I’ve outlined why the fast-paced nature of the cryptocurrency market demands quick and accurate decision-making skills while adhering to a well-defined trading plan. Cognitive biases like confirmation bias and anchoring can hinder effective decision-making; I advise traders that they must actively challenge their assumptions and seek diverse information sources to counteract these biases. The below is a useful visual tool that organizes biases in a meaningful way and helps you immediately identify some cognitive biases you may be suffering from, which are preventing you from reaching your full trading potential.

Once we identify the cognitive biases in our thinking and then combat them by challenging our assumptions and seeking more diverse information sources, it is critical to be open-minded. While learning from past mistakes is advised and an important step to improve, letting it derail your trading decisions is detrimental to your mental health and your financial portfolio.

Author, Ray Dalio, shares some poignant thoughts on this subject in this blog post. He also has an excellent resource called Principles which studies the relationship between individuals and teams-based performance. His LinkedIn account regularly shares clips from his research.

Figure 1- The Cognitive Bias Codex serves as a useful visual guide for organizing biases coherently, although it’s important to note that the codex categorizes both heuristics (i.e. how humans innately organize problem-solving activities) and biases (i.e. logical errors in problem-solving that are most common) under the umbrella term ‘biases’, both are ubiquitous.

The diagram above organizes 188 cognitive biases (and heuristics) that have been studied and appear in published cognitive science works. This research significantly accelerated in the 1990s. You will be familiar with many of them from day-to-day life such as the innate preference towards doing what we know (familiarity bias) or when skilled salespersons and negotiators use a specific dollar value to set illusionary expectations for the value of a product right from the start (anchoring bias).

I use the Cognitive Bias Codex as a reminder to search my decision-making process for cognitive and behavioral biases. These are most exacerbated under stress and when access to resources, like objective information, nutritional needs, exercise, sleep, etc., is minimal. Often in cryptocurrency trading, if the information to make a rational trading plan is not available, it is better to avoid acting.

Stress management

Traders must develop effective stress management techniques to remain focused and level-headed during extreme market events. Techniques like deep breathing, regular breaks, and maintaining a work-life balance can help traders manage occupational stress and avoid succumbing to biases stemming from emotional exhaustion.

I like to begin my day very early around 4:30 - 5:00 AM, this gives me several hours of uninterrupted, quality, quiet time to focus on my work. I am at maximum productivity and will purposely work on the most intellectually challenging work during this time in the early morning. As I have two very young boys, they are energizer bunnies and wake up ready to party and cause a ruckus! It’s difficult to be at near peak productivity when they are climbing on my back and smashing my keyboard, so I actually really look forward to playing with them in the morning and this is very refreshing for me.

I find this downtime necessary after 3 hours of intense work. Then I continue working throughout the day, I take breaks when I feel like I am slowing down a bit and begin to experience a bit of brain fog. By design to be at my best I keep an open schedule as much as possible which allows me to focus on the highest priorities at any one time and to always be available for my core Blockcircle team. This is especially important as the team is global and scattered across multiple countries and time zones.

Position sizing is an essential risk management technique and I find it is vital for avoiding stress-related biases. I never risk more than a set percentage of my total trading capital on a single trade, regardless of how 'sure' I might feel. This limit might be anywhere from 1-5%, depending on your personal risk tolerance. This is the potential maximum loss I can be exposed to any one single trade, after considering the stop loss, the leverage, the funding rates, the transaction processing fees, the transaction cost, the price slippage, etc…this helps limit potential losses and the obstructive stress that comes with being over-exposed.

As for when to enter a position, rely on your trading strategy and not on emotions or market noise. Use a combination of fundamental and technical analysis to identify potential opportunities, and enter only when the conditions of your strategy are met. This depends on whether or not you are scalp trading or swing trading or position trading etc.

Keeping my stress levels in check has contributed to my trading success and building the Blockcircle community on all levels. When stress levels are manageable, traders may not experience many issues with cognitive biases. However, it is during extreme market events that having a resilient mindset, strong stress management habits, and a clear understanding of cognitive biases is unquestionably needed.

In Section 2, I have provided a rationale for taking your trading psychology seriously. Having emotional control over cognitive and behavioral biases present in all of us requires our sources and responses to stress to be properly managed, just as we would manage the security of our trading accounts. Below I explain specific strategies and how they relate to your cryptocurrency trading.

Building and maintaining mental strength in cryptocurrency trading

This section delves into the strategies and practices that cryptocurrency traders can employ to build and maintain mental strength. I will examine the importance of cultivating resilience, practicing mindfulness and meditation, establishing a consistent routine and self-care, and implementing effective risk management strategies.

Cultivating resilience

In the face of extreme market volatility, traders must develop mental resilience to withstand setbacks and persist in their trading strategies. Embracing a growth mindset, which promotes learning from failures, can help traders overcome the sunk cost fallacy and be more willing to let go of losing trades.

So how do you turn negative emotions associated with failures into personal and financial resilience?

  • Acknowledge that making errors is part of the trading journey – you aren’t alone in making mistakes, and many experienced traders acknowledge that their war stories have been the most valuable experience they have ever gained!
  • Identify your strengths, not just your weaknesses – when reflecting on trades you regret, make sure to also acknowledge the aspects of the trading plan that you did maintain and what you have learned from the experience
  • Prioritize relationships, and join a group – whether you are a socially oriented individual or not, finding others who have experienced similar feelings helps objectivity return when emotions take over
  • Take care of your body – the limbic system (the part of the brain that deals with emotions, memories, and stimulation) is less active when physical stressors are low and the overall feeling of physical comfort is higher
  • Practice mindfulness and meditation – the internal process of focusing on and observing thoughts, emotions, and sensations rewards us with objectivity
  • Avoid negative outlets – outlets such as alcohol, drugs, toxic communication, and trading destructively are much more common than most traders realize, and they create a distraction and an additional problem to deal with rather than solve any issue

Mindfulness and meditation

Mindfulness and Meditation practices can help cryptocurrency traders maintain focus, reduce stress, and enhance mental clarity amid rapid market changes. Regular practice can improve self-awareness, enabling traders to recognize and mitigate the impact of behavioral biases on their decision-making.

I believe that mindfulness, which can be practiced anywhere and anytime by holding attention on the present and your surroundings without judgment, and Meditation, concentrating on a specific learned technique or practice to achieve a particular internal state like calmness, forgiveness, or compassion, are both helpful skills for traders to develop as part of their trading journey.

The key benefit is to reduce the internal ‘noise’ that can give rise to many cognitive and behavioral biases. For example, I have sometimes been prone to micromanaging a particular trade due to the illusion of control bias, sometimes referred to as over-trading. I felt I was more in control if I kept on top of the trade and tried to perceive the market sentiment from price action, whereas a mindful approach helped me to recognize that ‘need’ for control was active and to return to the original plan for the trade to successfully map out actions to take, for each possible scenario, upwards price action, downwards price action or relative equilibrium in price.

Consistent routine and self-care

Establishing a consistent daily routine, including regular exercise, healthy nutrition, and adequate sleep, can contribute to improved mental strength and overall well-being in the demanding world of cryptocurrency trading. A balanced lifestyle can help prevent decision fatigue and reduce susceptibility to biases.

My daily routine involves following a strict routine of analyzing the market top-down. Here is my step-by-step process:

STEP 1) This would start with looking at the total market capitalization of the digital asset sector. I am looking to see if there is any particularly interesting movement worth noting, I like to look closely at historical support and resistance levels and see if we are approaching any of those, based upon the current past 24-hour price history. I tend to look at this particular view on the 1 month and then the 1 week and then finally the 1 day. This top-down structure allows me to always start from the same point and allows me to gauge the market's bullishness or bearishness without an implicit bias.

STEP 2) I then evaluate the S&P 500 chart and watch how the equities market is moving. Despite how blindly bullish some altcoin crypto investors and Bitcoin maximalists are, it’s absolutely critical to keep a close eye on the traditional markets. The reason being, that they’re worth more than $60T, and crypto is still only worth $1T.  

It’s easy to suffer from tunnel vision whereby you largely ignore, ignore, and ignore all opposing views, but that type of extreme response is just as detrimental to your mental health as being a “permanent bull” (permabull).

Both extremes are just as destructive to your investment goals. My capital deployment strategy is governed by how much one particular digital asset is mispriced. For my business partner Crypto Hunter and I at Blockcircle, the goal is to exploit any mispriced asset (overvalued or undervalued) irrespective of where we are in the market cycle and irrespective of asset market cap size.

This is a critical point of distinction from the rest of the crypto community that undeniably suffers from the bullish confirmation bias.

STEP 3) I then examine the DXY chart on a weekly and monthly basis. This is an important metric for me to track because it’s historically shown some promise in gauging how risk-on assets would behave.

Our goal is to exploit any mispriced asset (overvalued or undervalued) irrespective of market cycle and irrespective of asset market cap size.

The key benefit of a disciplined approach is that I don’t let my emotions get the best of me.

Traders, and gamers, famously neglect their self-care routine when facing a challenging environment, and they underperform and encounter losses as a result. You can think of self-care as a small way to pay yourself for your work and invest in your longevity as a cryptocurrency trader. This topic and the actions to take aren’t complicated but I fully believe that neglecting self-care costs dollars and investing in it makes you money.

Self-care categories:

  • Mental
  • Emotional
  • Physical
  • Environmental
  • Spiritual
  • Recreational
  • Social

Self-care checklist:

  • Adequate sleep

Sleep needs for humans to perform at their best are normally distributed, i.e. the highest number (known as frequency in statistics) of people need 7 to 9 hours of sleep per day, but not everyone requires this amount or only one period of sleep per 24 hours, ‘adequate’ is unique to you.

  • Physical self-care

Showering, cleaning teeth, clipping nails, physical comfort, etc.

  • Nutrition

Feeling hungry or lacking nutrition initiates a stress response in the body which will quickly impact the mind.

  • Exercise

Despite popular marketing techniques, research shows empirically that simply walking daily is nearly as beneficial as the most efficient workout protocol. The majority of the variability in the statistical results is accounted for by ‘exercised vs. didn’t exercise’ rather than any technique. Think of more advanced exercise as accounting for just a few % more benefit, and don’t get hung up on whether you can follow a complicated routine with a number of reps, sets, minutes, and days, and achieve a higher VO2 score if it’s not your thing, unless your goal is to become an exercise scientist.

  • Hydration

The action potential of synaptic nerve connections in your brain and body relies on a balance of positive ions (Na+/salt, K+/potassium and Ca+/calcium), negative ions (Cl-/salt) and water as a solution to balance these ions. Feeling burnt out? Low hydration could be enabling a short in your circuits.

  • Clean space

The human brain filters most of the information we ‘sense’ and the result is what we ‘perceive’. Less distraction typically means more room for clear thinking. Is your work space somewhere you innately want to be or does it have a negative feeling to it?

  • Taking breaks

Human beings are inherently distractible, taking breaks allows secondary processes to clean up and defragment your mental and physical hard drive.

  • Professional/personal development plan

Your trading may require you to analyze specific information, e.g. which is the best liquid staking product, however, you should consider having a plan to develop your specific interests and goals as well.

  • Including regular social connection

Whether you can’t wait for the next party or you dread it, the benefits of connecting socially are similar to taking breaks. Social connection switches on secondary processing and promotes a return to internal equilibrium by filling a human ‘need’. Regular does not equate to frequent for everyone and empirically social connectedness/support does not appear to require revealing any feelings or talking about one’s own struggles at all, it can be connecting to discuss a hobby or interest or sharing a pastime with someone else. I know for sure that Blockcircle provides an important social outlet for many many members.

Trading strategies and risk management

Understanding and managing risk is crucial in cryptocurrency trading. Traders must be prepared to cut losses quickly and decisively to preserve their capital for future opportunities as discussed in Section 1 with IF / THEN planning. Sometimes this requires little mental strength while other times it has required a lot of my mental strength. Like many occupational skills, practice makes doing so easier and more routine over time. Implementing stop-loss orders and position sizing strategies can help traders overcome the disposition effect, where they hold on to losing positions for too long.

It is imperative to be comfortable with defining clear rules for entering and exiting trades as a way of building and maintaining mental strength in trading. Ultimately the trading strategy that suits you is derived from your risk tolerances, interests, and goals for trading. The number one most important aspect is that you can completely understand the variables of your strategy. A complicated, misunderstood trading strategy is next to useless compared to a simple, thoroughly understood strategy.

Some overarching trading strategy categories are:

  • Buy and hold
  • Value investing
  • Swing trading
  • Momentum trading
  • Scalping
  • Day trading
  • Positions trading
  • Arbitrage
  • Options trading

Subsequently, you can identify entry and exit rules to match your strategy and trading goals. For instance, one rule could be to only buy a cryptocurrency when its price is above its 20-week simple moving average or above the 21-week exponential moving average for a Swing Trader thesis or to sell when the Relative Strength Index (RSI) exceeds 80 on the weekly timeframe, indicating it could be overbought for another swing trade set-up.

I also love to use the Slow Stochastic and Stochastic RSI technical indicators and watch closely for hidden bearish divergences and hidden bullish divergences in swing trading.

These are effective methods for identifying entry and exit rules, and most traders are aware of them, however, very few actually follow the rules. It is important to follow a framework that works for you and for your level of exposure to the market.

Personally, I like to use a combination of leading technical indicators and a few lagging technical indicators as my primary trading thesis is Momentum Trading. For example, I closely follow momentum-based leading technical indicators on multiple time frames like the MACD to make sure that I see where interest begins to wane based on historical patterns. Momentum indicators can play a key role in identifying shifts in buying or selling activity related to stocks, particularly through a concept known as divergence.

Momentum indicators, while vital tools for traders are seldom used independently. They are often utilized alongside other technical indicators that highlight trend directions. Therefore, it’s advisable to use momentum indicators in tandem with other indicators such as volume, volatility, or direct price actions. This is to mitigate the risk of receiving misleading signals that could potentially occur when relying solely on momentum indicators.

Figure 2- Tracking fundamental metrics, like the social chatter on leading subreddits, allows a quantitative trader to react promptly and calmly when news events occur.

For example, I closely track and monitor the Reddit new comments (see Figure 2) because it is a good barometer of investor sentiment. Typically you will see a very strong, direct correlation with a rise in the number of Reddit comments, and a rise in the underlying interest in a particular asset, which leads to a rise in the price of that asset or vice versa.

Once the trend direction is identified, momentum indicators and fundamental metrics prove their worth by showcasing the intensity of these trends and predicting potential reversals. This combination of trend direction and momentum strength can offer traders a more comprehensive picture of the market's state.

Overall, it is important to be aware of the risks on the table at any given time.

How to take profit on a trade

The second that momentum slows, I begin to reduce my long positions and de-risk progressively. The drawback with this approach is that you are likely to take money off the table a bit early and before the absolute top or bottom price. I accept that I will not capture 100% of the trading opportunity because this approach has worked tremendously well for me. When my first take profit target has been hit, I like to begin withdrawing my principal capital used towards the trade, and when my second take profit target has been hit I take more off the table, and so on. I know that there will always be more trading opportunities in the future and I want to realize my gains and capture the bulk of the trade value, rather than risking this value for a small additional percentage.

Here is a useful guide I like to use to rigorously take profit which you can now adapt to your needs. I have split it into two parts, one covering the conservative approach and one covering the more aggressive approach. Together they adequately cover the full spectrum of possibilities:

Scalp Trading Conservative Take-Profit Approach

  • Take Profit Target 1 (TP1): 2%
  • Take Profit Target 2 (TP2): 5%
  • Take Profit Target 3 (TP3): 10%

Scalp Trading Aggressive Take Profit Approach (especially if using 3 times or more leverage)

  • Take Profit Target 1 (TP1): 0.5%
  • Take Profit Target 2 (TP2): 2%
  • Take Profit Target 3 (TP3): 5%

Remember that the above framework works well for scalp trades or day trades, however, for swing trades or longer time frame positional trades, I will use the below as a guide:

Swing Trading Take Profit Approach (or if using 2 times leverage)

  • Take Profit Target 1 (TP1): 5%
  • Take Profit Target 2 (TP2): 8%
  • Take Profit Target 3 (TP3): 20%

Following a plan to take profits is part of establishing and maintaining mental strength as a trader.

Achieving a/the flow state in cryptocurrency trading

Behavioral Psychologists define flow state as when you become fully immersed in what you are doing, this only happens under the right conditions. The first step to accomplish this in my experience is to have a distraction-free environment which contributes to improved focus and decision-making.  Achieving flow state in the volatile cryptocurrency market can lead to heightened focus, faster decision-making, and increased adaptability. This mental state can help traders stay present and resist the temptation to overanalyze or be influenced by the hindsight biases.

Balancing skill and challenge

To attain flow state traders must find the right balance between the difficulty of their tasks in the cryptocurrency market and their skills. Maintaining a sense of challenge without feeling overwhelmed is essential for achieving flow and avoiding decision paralysis caused by information overload. As described in Section 4 above, the trading strategy and goals you use need to be balanced with your current skill level.

Creating a distraction-free environment

A supportive trading environment that minimizes distractions and promotes focus is crucial in the fast-paced world of cryptocurrency trading. Clearing mental clutter and removing potential distractions can help traders avoid attentional biases and maintain their focus on critical information.

My trading setup is perfect for me. I use two stacked ultra-widescreen monitors, the top monitor has my core investment analytics tools, including my Discord, my TradingView view, and my own proprietary analytics apps, and the bottom screen has my e-mail open, my primary search station right in the center and this is where I am consuming the majority of my information daily and on the right my Telegram / WhatsApp / Skype / Twitter messenger apps to stay in touch with the team and with other traders and developers.

Being part of a professional team without toxic communication

In my experience, the suitability of one team or another varies between individuals. Some traders do prefer the opportunity to vent and as a group, this is not considered toxic or negative. Some traders find it extremely distracting to be in such an environment. My business partner Crypto Hunter and I have developed and designed the Blockcircle community to be as inclusive as possible of these needs without allowing distraction to undermine the performance of the team.

If you ask someone to get in the flow by themselves, it is a difficult psychological task. The barriers to making a choice (to press the button) are maybe about things like:

  • Which group is right for me to join?
  • Will I be embarrassed/humiliated by my lack of knowledge?
  • Will I misinterpret/breach the rules, maybe I'm better off on my own.
  • What if I ask the wrong question?
  • What if nobody can answer my questions?
  • Etc.

Being part of a professional team also allows you to observe the habits of other traders and decide what will contribute to your future success. Having support for your learning and new ideas is beneficial to building confidence that turns into a flow experience. I've seen this progression many times with our members. We offer them respect during this process and are patient with the onboarding process.

Lessons from cryptocurrency trading for life

In the final section, I will highlight the valuable lessons that can be learned from cryptocurrency trading and applied to various aspects of life. I will discuss the importance of embracing uncertainty, developing decisiveness and effective risk management, and pursuing passion and purpose to achieve personal and professional success. I would like this to be an opportunity for you to either reflect on the beneficial lessons you have experienced or to create an awareness of what to expect in your future.

Embracing uncertainty

Embracing uncertainty, as cryptocurrency traders do on a regular basis, can help individuals build resilience and adaptability, allowing them to thrive in various life situations. By applying principles from behavioral finance, such as understanding the limits of forecasting and the illusion of control, people can develop a more flexible mindset and learn to manage uncertainty in different aspects of life.

Perhaps take a moment to think about yourself when you first started looking into cryptocurrency trading or you have a friend or family member who is just beginning this journey. Traders in this sector gain a lot of confidence from the knowledge and experience they are able to attain, and I have personally witnessed that this can change people’s lives.

Decisiveness and risk management

Successful cryptocurrency traders have to learn to make rapid, informed decisions and manage risk effectively. This is a powerful skill set that contributes to improved decision-making and risk assessment in all aspects of life. Recognizing and managing biases like optimism bias and herd mentality can help individuals make better choices in personal finance, career, and relationships, in every important part of life.

Here are some examples of how you can apply these principles in real-life situations:

  • Personal Finance: Thinking of investing in a new catchy startup? Use your crypto trading chops to weigh the risks and rewards. Don't just jump in because your Twitter friends are blindly doing it.
  • Career: Got a job offer in a new city? Don't just pack your bags because it sounds exciting. Think it through like you would a trade.
  • Relationships: In a rocky relationship? Weigh the good and the bad. Decide what's best for you, just like you'd decide on a trade.

Pursuing passion and purpose

The passion and purpose that drive successful cryptocurrency traders can serve as an inspiration for pursuing personal and professional goals with dedication and determination. Setting clear objectives, being mindful of potential biases like overconfidence, and continuously learning from experiences can lead to a more fulfilling life.

Here are some examples of how you can apply these principles in real-life situations:

  • Personal Goals: Dream of writing a book? Set goals, stay grounded, and keep at it. Don't assume it's a walk in the park.
  • Professional Ambitions: want to be a top trader? Put in the hours and learn from every burnt trade. Stay humble and hungry.
  • Lifelong Learning: Passionate about languages? Set milestones, stay realistic, and enjoy every new word you learn.

I am sure you get the point I am trying to make by now, but, setting goals, learning, iterating, and adjusting your approach with an open mindset will help make you successful.


This series has covered the major points related to the psychology of trading cryptocurrencies, a truly deep and interesting topic. I hope to have offered useful advice on how to best use your time, mastering mental strength, well-being, and peak performance amidst the chaos of hypervolatility and behavioral biases. By embracing uncertainty, cultivating resilience, and maintaining emotional balance, cryptocurrency traders can navigate rapid price changes and extreme market fluctuations to achieve success in this challenging domain. These lessons can also be applied to various aspects of life, helping individuals thrive in the face of adversity and uncertainty while managing cognitive and emotional biases.

Final thoughts

Despite consuming countless articles that speculate on market movements, many traders find themselves no further ahead at the end of the day. Hours can be spent staring at screens, reading click-bait headlines, and consuming an overwhelming amount of market opinions. All of this activity leads to a passive existence, where learning and growth stagnate. As someone who has fallen into this trap in the past, I assure you that this is an inefficient use of your time.

I am so grateful for the lessons and blessings I have gained from a career in trading and I can't stress enough the importance of focusing on what truly matters in this industry. Every day, the digital world inundates us with "breaking news" and sensational headlines. It's easy to succumb to the deluge of information and feel an obligation to stay abreast of every development. However, by doing so, we unintentionally squander our most precious resource: time.

About Basel Ismail

Basel is a data scientist and financial engineer. He has extensive experience across Web3, including crypto + NFT market analysis as CEO of Blockcircle; digital asset investment + management as Founder + CEO of Biltmore Digital; and all things blockchain as the topic's lead course creator and instructor at Springboard.

He has an MBA from Cornell University, an MS in Information Security and Risk Management from Norwich University, a BComm in Computer Network Engineering from Ryerson University, and substantial training in machine learning and artificial intelligence. He has worked for and had leadership roles at Yahoo!, Scotiabank, Goldman Sachs, and American Express.


The information contained herein has been prepared solely for informational purposes and does not constitute any investment advice, solicitation, or recommendation of any product or service. Anyone who makes or changes the investment decision based on the content shall undertake the result or loss by himself/herself.

Please be aware that trading may involve risks and possible loss of capital. No information presented above is intended to serve as financial advice, a recommendation, or an endorsement of any digital assets, cryptocurrencies, or trading strategies. Please do your own research before making any of your investments or seek independent advice from your professional advisors, including lawyers, tax accountants, and financial advisors, if you have any uncertainty or doubt as to any of the matters presented.

The content of this document may be translated into different languages and shared throughout different platforms. In case of any discrepancy or inconsistency between different posts caused by mistranslations, the English version on our official website shall prevail.

Read Next

We use cookies to improve your experience. To find out more, please read our Privacy Policy. By clicking "Accept", you consent to our cookie and Privacy Policy. Or you may click “Decline”to refuse to consent.

Stay Connected

WOO connects traders, exchanges, institutions, and DeFi platforms with democratized access to the best-in-class liquidity and trading execution at low cost.

Terms of Service Privacy Policy Information Security Statement