Notes of an SMM-manager. Psychological traps on the way to a million. Part 2
Hello everyone! This is Anya, the SMM manager of Betatransfer Kassa. Here I share my experience in cryptocurrency investing, how I lost a lot in one evening, why I didn’t lose my mind that day, and how our psyche plays tricks on us. Haven’t read the first part? You can find it here. This is the second and final part on this topic. We are talking about 10 dangerous psychological traps.
6. Loss Aversion. Psychologically, losses are perceived more strongly than equivalent gains. Daniel Kahneman won a Nobel Prize for studying this aspect. Falling into this trap, traders experience a strong reluctance to realize losses and prefer to hold on to losing positions in the hope of a turnaround.
7. Gambler’s Fallacy. People are generally prone to gambling behavior, addictions, and often fall into various cognitive traps, losing money. In such cases, knowing about the existence of psychological effects is not enough; one needs treatment, psychotherapy, and to stay away from the cryptocurrency market and trading. The gambler’s fallacy in this context is the belief that the probability of future events depends on past events. For example, if the market has been falling for a long time, a trader might think it “must” start rising soon.
8. Recency Effect. When making decisions, we might not consider all variables, focusing only on recent events. This means not seeing the overall picture. For example, a person might decide to sell based on the current price, without considering the overall trend.
9. Self-Sabotage. In Eric Berne’s book “Games People Play,” a psychological trap called sabotage is described. The idea is that people tend to unconsciously sabotage their own efforts. For instance, investors might unknowingly make losing trades, thereby confirming their negative beliefs about their abilities. If you believe you are a failed trader, you are more likely to make mistakes.
10. Endowment Effect. People value their own possessions significantly higher than similar items owned by others. This same principle applies to evaluating one’s assets. People tend to overvalue their assets above their actual market value. This hinders timely selling of losing positions.
Knowledge and awareness of these psychological traps, as well as one’s individual patterns and behavioral flaws, are absolutely necessary for every crypto enthusiast, investor, and trader. This is much more important than learning about new trading bots, the latest news, or Twitter.
So, back to my evening when I watched thousands of dollars disappear from my balance. What to do?
I have read Kahneman and Berne, go to psychotherapy, and know all my character flaws. Therefore, that evening, I had another glass of wine, closed my laptop, and went to bed. Because no matter how much I wanted to buy in and play this roulette, I have a long-term strategy and remnants of rational behavior. And no matter how big the losses are today, it’s not a reason to increase them.
