Crypto Academy Season 3 | Intermediate course by @allbert –week 5: Psychology and Market Cycle.
I must appreciate professor @allbert for this week's lecture which is an exposure into the different emotions that has ravaged the technical market which needs to be addressed by traders for optimal returns from trade. He is my reductions from the following questions as comprehended, thanks.
1-Explain in your own words what FOMO is, wherein the cycle it occurs, and why. (crypto chart screenshot explanations needed)
The FOMO as an acronym which stands for "fear of missing out" according to professor @allbert. In this context, it is a market situation where by traders and investors operates based on certain unrealistic and intuitive market sentiments which can cause a great loss on their part as they feel they have missed out of a good opportunity in the market where they could have entered for a bull trend and by compulsion they are tempted taking a buy trade at a very high price of an asset.
WHERE IT OCURES:
This actually occurs at the verge of a chart bull trend where the price of the asset is very high and about taking a bear trend.
WHY IT OCCURS:
Finally this occurs as a result of some obvious reasons which I will be elucidating below but not restricted to this alone:
1- COMPLACENCY: most investors are so relaxed and unaware of the actual period an asset finishes it's bear trend and on the course of checking back, their tracked assets has almost exhausted it's bull trend.
2- FALSE ESTIMATION: Most investors/traders don't actually understand the workability of the technical market. I believe that every bull trend is ensued after a bear period unless on occassions of price breakout, so many traders don't have this basic knowledge which causes impatient and forces them to enter buy trades at a very costly rate where assets are very high.
3- WRONG MOTIVE: In this regards, most traders enters the buy trade at a very high price because they feel they are left out and other investors are scalping great profit in the market. So as not to loose out entirely, they would prefer to enter at that very high rate which on the contrary can cause a depreciation of their asset value as the processing trend may take a very steep bear path that may be difficult to recover.
We can see from this Steem to ETH scenario that due to fear of missing out, an unprofessional trader will like to enter the market at this high rate of price of Steem because he intended not missing out of trade at all.
2-Explain in your own words what FUD is, wherein the cycle it occurs, and why. (crypto chart screenshot explanations needed.
This acronym according to professor @allbert stands for "fear uncertainty and doubt". This is a market senario where traders give up on cause of the above acronym above (FUD).
Here traders tends to sell their assets where the price is very low and about taking a bull trend where they could have made profits, so they sell due to anxiety and doubt if the asset will possibly rise or if it's still going down, so the sell based on the above mentioned contingencies.
WHERE IT OCCURES:
This scenario ocures normally at the bottom side of the technical market where prices are low of which after it, should be the inception of a bull trend unless on grounds of market break.
WHY IT OCCURS:
Here are some obvious reasons this occurs but not just restricted to it alone:
1- CONTINUOUS FALL IN PRICE: I believe this to be the major reason why most traders sell their assets at a very low rate. Since no one would like to have his assets in a continuous depreciation, so for to avert this continuous fall in price, the sell unintentional that their may be a bull trend after the immediate period.
2- NAIVETY: I acknowledge the fact that their are some traders/investors without adequate information about the technical market Operation, which on the norms, a down trend is followed up by a bull rush unless on ground of market break where the trend gets to the support level and breaks deeper.
So traders with little knowledge of the market Operation will sell at a very low price when they would have waited for a reversal of the market trend and would have then made some profit.
3-LIQUIDATION: Most traders have this in mind "absolute loss of asset". As not to loose out entirely, they would prefer to have some value of their asset in possession. so for fear if this, they sell their assets without checking out on the next line of action of the trend which may have traded in their favour.
In this market scenario of FUD, using GTC to BNB asset, it is believable that most traders lays off their assets at this low price of GTC due to irrational doubt that the market may not rise in the nearest possible period so they sell at the marked point against further depletion of their GTC asset but finally we can see how it started rising after the marked point where some traders have already sold.
3- Choose two crypto-asset and through screenshots explain in which emotional phase of the cycle it is and why. Must be different phases
A full analysis into this market setting of ETH/BTC indicates an FOMO phase of high enthusiasm, thrill, hope, optimism, believe euphoria. It clearly signifies a situation where by all these positive emotions, a trader enters into trade by purchasing the ethereum despite it's high price level from 0.058614 to 0.059835 so as not to miss out of trade entirely.
Reasons for entering this trade is actually based on two notions and possibly other contingencies which are:
AGAINST MISSING OUT ENTIRELY: This trader despite this increased price of ETH will enter for a buy with the intention that other traders has really made some profit and therefore finds it a great loss if he doesn't trade at all in this phase, although he can make a little profit but not compared to when he had entered earlier before this time.
FURTHER INCREASE IN PRICE: This trader is also thrilled with the enthusiasm and hope that there'll be further increase in the price of ETH which is why he/she is compelled to enter at that high rate of ETH crypto. But on the contrary there is the tendency of the trader making some profit but not as much as he could have made if he had entered earlier before this point.
On a full analytical scale, this is the current trend of AAVE/BNB as of my time of view, it is actually in complacency, anxiety, denial, panic, anger and depression phase.
Nevertheless, this is also the case of FUD because of the steep fall in the price of AAVE on parity with the BNB price.
As the price of AAVE falls from 1.0472 to 0.9366, it has created all these negative emotions in the heart of an unprofessional trader because his intention should be that the price of AAVE should keep on the bull trend but since it has taken a reversal against their intention, it now instills these wrong emotions.
so as price keeps going down, he is forced to lay off his AAVE at possibly 0.9366 without the foresight that price is about going up again. So this is the case where traders are instigated and forced to sell off their asset with the wrong emotions due to the fall in price and merely looking at this trend, it is obvious using the MACD indicator that the price of AAVE is about going up again. But out of wrong emotion due to a fall in price, a trader has sold his asset at this low price level of AAVE asset.
4- Based on the analysis done in question 3, and the principles learned in class, make the purchase of 1 cryptocurrency in the correct market cycle. The minimum amount of 5USD (mandatory), add screenshots of the operation and the validated account.
In concordance to this, I will be purchasing Ethereum with 88.60USDT worth of BTC at a clear market trend.
this is my wallet before purchases
I bought at 0.059401 after a clear indication of a bull trend, emotionally in hope and an assured enthusiasm although using some indicators against incuring any loss.
here is my wallet after purchasing Ethereum
finally I sold at 0.059835 after observing an indication in price decrease using some technical indicators.
Finally here is my wallet balance after trade.
From my wallet view, it is obvious that from the previous balance I had 88.60 USDT worth of BTC and currently after trade I now have 87.54+2.16=89.7USDT. And from this, I have made a profit of 1.1USDT
The FOMO and FUD is actually a psychological state that has sapped many traders of their assets values which needs to be addressed by applying technical indicators into trade charts instead of just working with ones emotions. Finally traders should try and get acquainted to certain indicators in the technical market and also work with them instead of their emotions for maximum returns from trades. Thanks for patiently going through.
Cc: @allbert
Hello @ Thank you for participating in Steemit Crypto Academy season 3 week 5.