Why do some people profit while others face liquidation in the cryptocurrency market? Check if you’ve encountered the following situations!
In the crypto world, many people continue to trade even after experiencing liquidation, mainly due to the following reasons:
The Influence of Speculative Psychology
- Desire for Quick Profits: The high returns of contract trading are highly attractive; in the eyes of many, it is a shortcut to rapid wealth accumulation. Compared to other investment avenues, they firmly believe that contracts can yield huge profits in a short time. This strong desire for quick turnover makes it hard for them to give up, even after experiencing liquidation. Just like some people who witness others becoming overnight millionaires through contract trading fantasize about becoming lucky themselves and continue to invest even after liquidation.
- Unyielding Attitude: After liquidation, most people find it hard to accept failure, believing it’s just a matter of bad luck or operational errors, and they are convinced they can win back their losses next time. This unwillingness to admit defeat drives them to continue trading, trying to turn the situation around. For example, someone might experience liquidation due to a misjudgment in contract trading but believes their market analysis is mostly correct, attributing the failure to unexpected factors, so they decide to try again.
Cognitive Bias Issues
- Overconfidence: Some investors are overly confident in their trading abilities, thinking that through learning and training they can master contract trading skills, thus ignoring potential risks. They believe they can accurately judge market trends to make profits in a complex market. For instance, some novice investors feel capable of engaging in contract trading after learning some basic trading knowledge, without fully recognizing the uncertainty and risks involved in the market.
- Misunderstanding of Risk: Some people do not adequately understand the risks of contract trading and fail to truly grasp the severe consequences of liquidation. They might view liquidation as a temporary setback, not realizing it could lead to significant financial loss or even bankruptcy. For example, some individuals focus solely on potential profits while ignoring risk warnings, believing they can control risks, only to regret it after facing liquidation.