I saved this tweet from Jamie, also known as @Your_NLP_Coach in twitter. He is a member of The Birb Nest, a trading community platform. In this tweet he talks about a common feeling for almost all the investors have, the Loss Aversion.
Loss Aversion means that we feel the losses much more than we enjoy our gains. I have felt it in my own body, specially when you are a non experienced investor or it is the first time you enter the cryptocurrency WILD market.
According to him:
The pain of losing is psychologically about twice as powerful as the pleasure of gaining.
Loss Aversion lead to more losses. Traders are willing to take significantly more risks just to avoid losses.
It causes us to deviate from our trading plan and to abandon our trading principles like preserving capital.
It happened to me on the past, the fear of keep losing more money on a bad trade pushed me to sell it before the recovery started. This made me feel stupid twice, first when I decided to enter the trade "too early" and secondly when I decided to sell at a loss.
The worst part is when right after selling, things magically start rising again and you are already OUT.
This picture makes a lot of sense to me. I felt it many times.
I've changed my strategy a bit lately. From going from being a pure HODLER to basing my investment strategy on DCA (Dollar Cost Averaging).
I feel a lot more comfortable with this strategy. I have minimized the fear of loss immensely. Now, if the price goes down it is still an opportunity to accumulate more.
I have to admit that it feels REALLY GOOD when you are buying the DIP.
By the mid of October I am planing to make a move, and when I receive my paycheck I will make another one. Every 15 days sounds good to me, let's see if I am consistent enough to make it a reality.