Let's understand this through an example:
You have 1 million yuan in assets and decide to use 700,000 yuan of it to buy a cryptocurrency.
On the first day, the coin fell by 1%, and you lost 7,000 yuan, but you didn't care, thinking that the price would rise sooner or later.
On the second day, the price fell by another 3%, and you lost nearly 20,000 yuan, but you still firmly believed that it would rise again.
On the third day, the price rose by 2%, and you recovered about 10,000 yuan of losses. Your mood improved slightly, and you felt that everything was under control.
On the fourth day, the price of the coin suddenly plummeted by 20%, and you lost 140,000 yuan. You began to feel uneasy and hoped that it would rebound the next day.
On the fifth day, the price of the coin rebounded by 5%, and you breathed a sigh of relief, thinking that there were still rules to follow in currency trading.
On the sixth day, the price of the coin rose by another 1%. Although the increase was not large, at least there was hope of making a profit, and you felt satisfied.
On the seventh day, the price of the coin rose by another 1%, and you began to look forward to the future trend.
On the eighth day, the price of the currency continued to rise slowly, but you remained optimistic and believed that you would get your money back one day. On the ninth day, the price of the currency suddenly plummeted by 30%. You began to panic and wondered if you had chosen the wrong currency. On the tenth day, the price of the currency fell another 10%, and you felt angry and disappointed. On the eleventh day, the price of the currency entered a sideways consolidation period. You saw someone on the Internet saying that this was a bottoming signal. You believed that the market was accumulating momentum and firmly believed that the price of the currency would rebound soon. In the following week, the price of the currency continued to go sideways. You learned more about cryptocurrency online and believed that this was the "main force accumulation stage", so you continued to hold the currency. A month later, the price of the currency not only did not rise, but continued to fall by 20%. You began to feel numb and thought that it would be great if you could get your money back. You decided to withdraw the funds and stay away from cryptocurrency. But things did not go as you wished. The price of the currency continued to fall. At this time, you finally understood the concept of "stop loss". You struggled painfully in your heart, not knowing whether to liquidate or continue to hold. At this moment, one of your friends told you that a new coin has soared by 200% recently, and shared his "leading strategy". You believed it, sold the coins in your hands, and told yourself that you would come back to cover your position after making enough money on the new coin, and hold it for a long time after you get your money back.
Through this process, do you understand the root cause of the loss in coin speculation?
