Why People Tend To Lose Money Trading Coins By Getting Hypnotized By 'The Rewards'?
Being a huge advocate of getting into the block-chain currency trading game amongst my friends and family, I always caution them not to get hypnotized by the numbers. Making $100 - $300 from a $50 investment in the span of a day is overwhelming especially to a naive 'crypto-skeptic' trader. Our primitive human minds are programmed to see patterns, this being possibly one of our worst and best traits when it comes to trading.
Around four months ago, the topic of bitcoin and 'alt-coins' came up on a night out with my friends. I couldn't contain my excitement and went on a 1 hour rant about how revolutionary it will be. One of my friends was particularly intrigued and is usually over-zealous about these sorts of opportunities, naturally, he was thinking that he'll invest $100 and wake up to $1,000,000 worth of "Bitcoins". I cautioned him that although these stocks do work at a faster pace than traditional stocks, he shouldn't expect to make much over night. Its called investing for a reason and not free cash flipping.
pretty sure he was thinking something along these lines
I told him that he was better off educating himself on what exactly he's trading first before even attempting it, but he was already talking about joining the Lambo Club. A few days go by and I decide to check up on him. He said that he put in an extra $200 into his Bittrex account and that he was at $1,200 on his portfolio value, (being me I thought he was talking in the term of P.O.I) I congratulated him and let him get back to his trades. I was suspicious and something wasn't adding up, either he was lying to me or he manage to ride the mooning of a 1 sat coin.
Friday morning, not even a week after he started trading on Bittrex, I get a call from him. He was talking about how he lost $400 dollars after being in a dry spot at $1000 for the past few days and if I could give him anytips, I told him to hold off on any further trading. After class I came around to his place to check out his transfer history, I was pretty sure he was doing the exact thing I warned him not to do: Day-Trade. Opening up his transfer history I couldn't believe he was thinking that he had only invested $300. He somehow lost track and bought $700 extra of bitcoin and spent it day trading too, putting the grand damage total to $1000 (may I remind you he is a student). Explaining to him exactly what he had done, I could see his morale in trading de-materialize before my eyes.
Lessons To Take Away From This
KEEP TRACK OF YOUR INITIAL INVESTMENTS AND FEES! I can not stress this enough!
Only trade what you're willing to lose! Seems obvious but you'll be surprised the excuses a human brain can make to justify anything.
Never become cocky and over-zealous by trying to play the market, its almost like trying to win the lottery.
If your budget is less than $10,000/mo on trading, DO NOT DAY TRADE!
Sincerely,
@Pryce