Crypto,  Trading Lessons

Emotional Trading Isn’t Always Bad

The title of this post alone is probably enough to get a lot of trading “gurus” frothed up into an autistic tizzy, screeching about how “emotional trading will get you rekt!”

And to a degree, they’re right. But they don’t go deep enough on the topic. 

Trading purely off of emotional swings will absolutely cost you all, or at least part of your money, especially as a newbie. 

What I’m talking about, is listening to your gut instinct.

Now, a disclaimer I have to give here is that if you’re new to trading, or have only been trading for a short period of time, you probably shouldn’t be listening to those emotional pokes and prods, because you haven’t had time to calibrate your gut feel radar yet. 

I’ve been trading off and on for years, starting back when I was in my late teens, flipping penny stock pump and dump newsletter plays. They always referred to them as “promotions”, but anyone familiar with the game knew exactly what they were. 

My first foray into trading wasn’t when I showed up to crypto twitter in 2018.

Even so, the crypto market was a very different beast, and it took me a while to develop a feel for how things played out. Eventually, through repetition, I started to develop that same gut instinct I had developed in penny stocks that would tell me it was time to bail on a play, before the impending dump to the shadow realm.

So, what’s the point of this post? It’s not just to pat myself on the back.

Your Gut Knows Better Than You

The point is that once you’ve been around long enough to start recognizing these patterns that play out repeatedly, you should START leaning into “emotional trading”, by which I mean, trusting your gut instinct.

It’s sort of a tricky line to figure out, and there’s really no shortcut I can give you to reach that state of calibration more quickly. 

The fact is, you just have to spend time in the markets, making and losing money, and eventually it should start to click. 

Almost all of my big losses, or times I’ve roundtripped crazy gains in the past 3 years, have come when I ignored my gut instinct. 

In the last bull run I traded about $8k up to just under $300k. Then, when the market rolled over, I got that pang in my gut that said “Bail! Get the fuck out!”.

Instead of listening, I rationalized it away with thoughts like, 

  • “It’s just another dip”
  • “I’m just being weak handed”
  • “What if it doubles from here like all the influencers say?”

If I’d listened to my gut, I would own my own house right now. Instead… I bag held all the way down until I finally sold for about $40k.

In that same run, while everything was still pumping, I bought $ASS coin with a few hundred bucks as a flip. When my bag was worth $9k, I had this feeling that the hype had reached its peak. 

I wasn’t even watching a chart. It was just a sixth sense I had that said, “This has to be the peak of the frenzy for this coin, doesn’t it?”

Again, I can’t tell you exactly WHAT it was, but I felt it. 

However, instead of listening to that voice from my second brain, I let greed drown out that voice and held. When I sold, I still managed to profit about $2k, but it could have been a lot better.

My most recent example of this was with $SHIA. 

This time, however, I listened. 

I bought this coin with $2800 in spare ETH that I had in my wallet, a little below the blue arrow (I’m pretty sure it was at the blue arrow, I’m writing this from memory) on that first retrace after it turned up again. I held and watched it make that top where the longer wicks formed, and at that point… I started to get a tingle.

I didn’t want to cut prematurely, so i just watched.

But when I saw the long red wick shown at the yellow arrow, the gut feeling kicked into overdrive, telling me it was over. I gave it just a little more time to play out, and ended up cutting a bit above the white arrow.

As you can see, my gut instinct was right, as the chart how slow bled into oblivion since.

On that trade, I started with the original $2800. At the peak, my bag was worth over $10k. When I sold, I cashed out roughly $6.5k.

Would it have been cool to keep all $10k? Yeah, but that’s trading.

Instead of buying into whatever moon mission narrative the shills had been pushing, I simply tuned them out, watched the price action, and listened to my gut.

I would have kept even more of my profits if I’d listened to the first initial tingle and sold my whole position, or at least sold half and just watched the rest to see what happened.

Developing Your Gut Feel

Like I said above, there really is no quick fix. There’s no course I can sell you on developing this feel.

You just need to spend time watching how these coins move, the patterns they tend to follow, and getting familiar with the feeling of how these hype cycles operate.

It’s all intangible, there are no indicators you can point to that will let you know the hype has reached it’s peak. It’s something you just have to learn to feel, like we’ve been discussing.

It’s an art, not a science, as cliche as that is.

One thing I do advise against though, is falling into the trap of “paper trading”.

I wrote an entire post about why paper trading is worse than worthless, and you can read it here if you want more insight into my thoughts on that. I won’t rehash the whole thing here.

If you’re a total newbie and are still making sense of these markets, a few books that can really be helpful are:

Neither of these books will give you a step by step formula, or a specific trading strategy.

What they WILL do, is help you understand the psychological forces that move the markets one way or the other, why the general public nearly always loses at trading, and common mental traps you’ll likely fall into. As well as some valuable time tested lessons.

I must have read Reminiscences 6 times at this point. Beyond having some good general trading lessons, it’s just an entertaining book.

Give them a read and see what resonates with you, but don’t get too caught up in “learning”.

The best way to learn and understand trading is to get skin in the game and learn through doing. Anyone who tells you otherwise is simply selling you a dream in hopes that you’ll buy their course or mentorship.

Concludere

That’s it for this one. Pretty straight forward.

Once you’ve taken the time to develop your gut instinct, you need to listen to it, and not rationalize and second guess it away. Doing so has cost me more money than I care to think about.

The last thing to keep in mind is that you WILL LOSE MONEY while you develop that feel for the markets.

Consider it tuition.

Even once you’re good at trading, you’ll still lose money on some trades.

You’ll almost never snipe the top and secure 100% of the potential profits. Neurotically worrying about such things will only frustrate you to the point you give up on trading entirely.

Just put in the work each day, gradually improve, and eventually I might be hitting YOUR DM’s to find out what’s on YOUR radar.

Until next time,

Fractal

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