【Avoid two common trading mentalities and stabilize your trading mentality】

Last year, I persuaded my childhood friend to invest in a few coins. He was an outsider and had no interest in stock management

At the beginning of this year, he returned nearly four times his investment. He called me dad every day and asked me about my well-being

Now he only earns more than double, and he is frowning every day

He said he regretted why he didn't sell it at the high point and buy it back now

I said this is a common problem for newcomers - dreaming

He likes to review history to cheer himself up, and wants to use the established facts of the present to guide the unknown market in the past. His catchphrase is "If I had known, I would..."

At the same time, have you found that he has other psychological states?

Yes, it is the "endowment effect" and "loss aversion"

When I was a child, my father once told me before my exam: "I have bought you a game console, but if you don't do well in the exam, I will return it."

Later, I found that this effect is much better than telling me: "If you do well in the exam, I will buy you a game console."

The reason is that the first half of my father's sentence made me feel that I already have a game console, activating the ownership effect, while the second half of the sentence directly made me feel loss aversion. The pain of losing something is far greater than the joy of gaining something, so my performance in exam preparation will be better than other times.

Corresponding to the situation of my childhood friend, he is still in a state of floating profit, but why is he frowning? It is because he has a sense of belonging to the four-fold floating profit in the past, and believes that it is the money that has entered his pocket. Now there is only one-fold left, so he naturally has loss aversion, so he is obviously making money but is very painful.

Three points to summarize

1. Don’t dream, we can’t predict the future, never regret a trade

2. Your money is yours only after the position is closed

3. Try to shift your U-based thinking to a currency-based thinking