How to develop the right mindset?
Commit to your education on trading and the markets: Take time to learn. Read books, articles, ask and debate. Learn from your mistakes and also from the mistakes of others.
Start with paper trading: Take the time to actively use charts, and find entry or exit points before risking your money. Accumulate charting time and trading experience, it does make a difference.
Control your losses: Never risk more than your risk management can afford and always have a stop loss on all your trades. Take profits consistently, don't let greed take control.
Keep a journal of your trades: You'll be surprised how effective it is to write down the trades you execute. Document each trade: why did you take it and what happened? Even document the negative and positive emotions you felt on each trade. Then once a week, read it and note your good and bad habits. Then take that learning and apply it to the next week of trading.
Detach yourself from your trades: Your cryptocurrency trades will end in profit or loss. Once you have performed the operation, you will have no control. Do not watch your trades obsessively as this stimulates the amygdala and can cause you to act impulsively.
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How can I overcome emotional trading?
The cryptocurrency market is driven by sentiment. Thousands of retail traders hit the buy and sell button every day, under the influence of emotions such as greed, fear, FOMO and revenge trading.
It is not easy to reduce emotional trading. It takes effort, but there are some positive habits you can start to apply that will help, check them out:
Do not review the trade second by second after opening: Ideally, you should close your charts so that you are not seeing what is happening every second, which can be stressful. Instant monitoring can make you feel elated when the trade makes a profit and bummed out if you're in the losing zone. Place a couple of alarms in crucial levels to be updated and free your mind from the trade.
Stop trading after three consecutive losses: Tomorrow is another day. Close the trading platform and write in your trading journal what happened. Analyse the losses. Was there anything you could have done better?
Choose a less volatile trading session: Cryptocurrencies are volatile at best, but study the charts and determine when the market is a bit more stable and trade during those periods.
Control your emotions: How do you feel? Are you tired or excited, fearful or worried about missing out on a good opportunity? If you feel less calm, walk away and come back when you have your emotions under control.
How can I avoid operating impulsively?
First, detach yourself emotionally from the results. Then ask yourself if you are overtrading or feeling the urge to jump into trades, trading can be addictive. Check yourself.
Greed and fear are two emotions that dominate most traders. If you are too afraid and have the impulse of closing a trade early, you are probably risking too much. On the contrary, if you don’t feel like taking profits, maybe you are sizing too little. Find your balance to better keep emotions aside and operate comfortably.
FOMO is another important emotion that can lead to mistakes. Missing out on a great opportunity can be frustrating. But in reality this mentality does not make much sense. The cryptocurrency market is huge, with the potential for the trader to make multiple trades every day. There will always be a new opportunity. If one opportunity is missed, it doesn't matter, sooner or later another will appear. As you focus on the profits you missed, you waste time getting caught up in your emotions when you could be taking advantage of the next best trade.
Don't be greedy. Small, incremental profits grow a trading account steadily. Take profits regularly. Everytime you think of it, do it, banking is the only way to enlarge your account.
A significant loss can follow a big winning trade. Market is just like that. Assume it and move on to the next one.
View trading as a long-term game, where your goal should be to protect your capital and consistently grow your account one dollar at a time. The profits you make must be fed and protected. There will be losses sooner or later, that's inevitable, but treasure your winning trades and don’t give all your profits gained with hard work back to the market again.