Why are people reluctant to give up? What is the root cause of losing money?
Article source: Outside the words
Although the recent price increase of ETH is good, if you have only entered the market in the past year or so, looking back at the overall situation of your holding accounts in the past year, you can find that many times the ETH you hold is comparable to stablecoins, especially when you see some other coins rising all the way and breaking new highs, and the position value of ETH is like a "pool of stagnant water" without any movement.
There seem to be two extremes in the matter of investment, one is to give up prematurely, and the other is to be unwilling to give up.
A few days ago, I happened to see a friend leave a message complaining that he invested $20,000 to buy ETH last year, but a year has passed, although ETH has risen again, but his account is still stuck at $20,000, which is equivalent to a year of playing in vain.
In fact, as far as this partner's investment philosophy is concerned, I think there is nothing wrong with it, because he bought ETH, the king of altcoins, not various junk projects or on-chain dogs, but this does not seem to change the fact that buying ETH is a relatively bad investment experience that this partner has done in more than a year.
Although ETH has experienced 4 waves of gains from last year to now, as shown in the chart below, that is, in the past year, this little partner has theoretically had at least 3 opportunities to withdraw funds from ETH and invest them in other projects with more opportunities.
But why didn't he do that?
I think this can be psychologically boiled down to a possible manifestation of a sunk cost fallacy or cognitive dissonance.
Thesunk cost fallacy refers to the fact that when people have invested time, money or energy in something, they are often more reluctant to give up, and there will be a mentality of "I have paid so much" and why give up now. Cognitive dissonance refers to the fact that when a person's inner thoughts conflict with his actual behavior, in order to reduce discomfort, he often stubbornly maintains a certain behavior or concept, such as knowing that the investment is a failure, but he is unwilling to admit losses in time.
This kind of psychology can be summed up simply in the vernacular as "unwilling to give up".
Although there were at least three opportunities to withdraw without loss during this period, it was because he was "unwilling to give up" and worried about missing out on the market, preferring to watch his money (position value) actually not grow for more than a year, rather than admit that he was "wrong" and looked for better opportunities.
This matter is also a bit like an office worker, because he is worried that he will "not have this job in the future", so he is afraid of giving up, and has been enduring low-paying and overtime work, and does not dare to leave or change jobs.
So, how can you overcome this mentality? From the perspective of investment, one of the better solutions is: reasonable goal planning and strict position management.
For example, your investment goal is to use long-term planning to resist short-term temptations, for example, your investment goal is to reach $10,000 in the next 5 years, so you don't need to worry too much about the current short-term being trapped at $3,800.
If you don't want to bet 100% on a single goal in 5 years from now, and want to seize other short-term opportunities at the same time, then you need to continue to plan further in position management, for example, as suggested in our earlier article, you can consider dividing your positions into a 5:3:2 ratio, of which 50% of the positions are for long-term fixed investment in ETH (or BTC, which can be your most optimistic project with a long-term development vision for the industry)3 You can try to buy and sell a few blue chips you like (even, a small part of them can be allocated to betting on local dogs), and the remaining 20% maintains cash (U) liquidity.
But for many people, some strategies that seem reasonable seem ineffective or meaningless to them, such as the 5:3:2 position management plan we mentioned above, I remember we often mentioned it in the 2022 article, but so far, it seems that not many people will actually follow this advice (of course, I have not followed this one, based on personal risk appetite and goal considerations, I currently use 8:1:1 position planning, This matter has also been shared in previous articles).
A core problem here may also be the issue of "capital volume".
For example, if someone enters this field with only $1,000, they may prefer to make a small profit by gambling on a local dog, quickly earn excess returns, or even get rich overnight, rather than making a 5:3:2 bullshit position plan.
On the contrary, for people who enter this field with $1 million, this should naturally not be a problem, because according to the amount of money these people, they will definitely know what to do is relatively safe and reasonable, and it is impossible to directly use $1 million to gamble on a copycat (unless his 1 million is blown by a strong wind).
Therefore, for those who like to gamble, there are nothing more than two results, one is to get rich overnight, and the other is to return to zero. When every gambler first enters the casino, they firmly believe that they can get rich overnight, but more than 99.9% of people only end up with zero, which is a stark reality, but many people still choose to turn a blind eye, especially those who have just stepped into the casino.
Position management is not a simple division of funds, or a bid to buy, in the operation of trading, "buying" is actually relatively easy, as long as there is a reasonable target plan and execution strategy, it is also easier to buy relatively low. But "selling" seems to be a problem faced by many people, and I often see people complaining: I sold too early, I regret it. I sold it too late, I regret it.
Imagine an example:
Zhang San buys a token and the token rises by 50%, so Zhang San sells the token because he thinks the gains may be lost if he doesn't sell it. But after Zhang San sold it, the token continued to rise by another 500%, so Zhang San, who had a 50% gain, fell into deep regret and blamed himself for selling too early.
Li Si saw that the token had risen well, so he chased after it, and soon got a 200% floating profit, but Li Si believed that if he continued to hold the token, he could get 10 times, 20 times or even more returns, thinking that the opportunity to change himself had finally come, and the 200% return could no longer satisfy himself. So Li Si also fell into deep regret, blaming himself for selling too late, and then cutting the meat and selling it unwillingly, not selling, he watched other tokens soar, and could only stare, envy and jealousy.
Zhang San and Li Si above may be the epitome of many people, and the main reason for these results may be the mentality of "unwillingness to give up" mentioned above.
The market is difficult to predict, and I don't want to do anything thankless, all the current buying and selling issues, we will not give specific targets, that is, we will not tell you which coin to buy now to make a fortune, nor will we tell you at what price to sell the corresponding coin.
The most we can do is to share in some articles and tell you what we are more optimistic about now, what we have bought, and how much we have sold. At the same time, some suggestions based on methodology will also be given, such as what we have already mentioned in previous articles: long-term trading plan, it is recommended to operate in batches, the simplest strategy is to insist on buying, buying, buying, buying, buying in the bear market, waiting until the bull market sells and sells; Alternatively, you can consider combining weekly (candlestick) indicators to do right-hand operations, such as EMA21 and EMA55 (when EMA21 crosses EMA55 from below, it can be seen as a bullish signal, and when the price of Bitcoin touches above EMA21, it is a good stage entry point). For short- and medium-term strategies, it is recommended to directly combine the fundamentals, K-lines, or market sentiment, capital flow, etc. of the project to buy + sell in batches, and at the same time, make a take-profit/stop-loss plan to control your greed (i.e., formulate strict trading discipline).
Thereis no upper limit to making money, and there will always be endless money and various new opportunities in the market. But there is an upper limit to losing money, your capital volume is your upper limit, that is, the principal is your ticket to participate in the market, and a major loss may make you lose the opportunity to return to the market forever.
For example, we also believe that Bitcoin may still reach $130,000, $150,000 or even higher in this bull market, but we still decided to start selling in batches and stages starting from $100,000 to make the necessary profit-taking. We will not regret selling too early, let alone selling too late, we are just strictly implementing our own trading discipline and trading plan according to our own risk appetite.
"Save your life first, then make money" is a good investment philosophy, the market will never lack new opportunities, but whether your principal and mentality can wait for that opportunity is a key question you should think about.
Many times, once people fall into the mentality of desperately pursuing every transaction perfectly, it usually leads to a decrease in their overall "good trade", and may even fall into a kind of retaliatory trade. Therefore, we do not pursue the so-called perfect decision (always be able to buy at the lowest point and sell at the highest point), nor do we pursue the absolute return of a single transaction, but we pay more attention to the overall position size under risk management.
In short, you should always make clear decisions about your own funds and try to be able to attack and retreat. Whether it's a masonry player or a card player, you don't need to make meaningless comparisons with others, as long as your position can make you feel comfortable most of the time.
Everyone's perception of money is different, and the reason why people lose money is not caused by dealers and whales in the final analysis, but by their own "unwilling to give up" mentality.
The market is relentless, but full of opportunities. The market tends to reward those who are disciplined, patient, and have a long-term strategic mindset, while punishing those who are greedy, emotional, and have no strategy. So, what kind of person do you belong to?