There is always a disposition in people’s minds to think that existing conditions will be permanent. When the market is down and dull, people tend not to perceive this as a prelude to a period of activity and advance. When prices are up and the market is prosperous, it is always assumed that prices will continue on upwards forever. You see, amongst the most average crypto traders, there is a lack of ‘big picture’ thinking. There is a persistent failure to plan or even to simply think ahead. The one fact pertaining to all market conditions is that they will change. This change follows modifications of the law of supply and demand.
It is true in finance as it is in philosophy or in any subject of human thought, that the general tendency of weak human nature is to believe what one wants to believe instead of what the ‘facts’ actually are.
The judgements formed by the mass of participants in this market are apt to be those of idiosyncrasy, passion or temperament, rather than of calm and poised reflection. In actual fact, there are very few players in this market who are so constituted that they can look facts, and facts alone, in the face and form conclusions uncoloured by native optimism or pessimism.
Simply, novice traders lean towards making decisions based on emotions and temperament, whilst skilled players form their trading decisions based solely upon logic – and logic alone.
It amazes me how many people want to ‘be consistently profitable’ in the altcoin market – yet they don’t know how to perform tasks as simple as measuring sell resistance via the orderbook. In fact, most people in this market don’t even understand the definition of the phrase ‘sell resistance’ – or the grossly important role it plays in the outcome of each and every one of their trades.
People want to be consistently profitable, yet they don’t understand (nor do they seek to understand) the most simple market dynamics. If I was to question a novice trader and ask him why trading volume is important, I wouldn’t (in a million years) receive an accurate response. Yet, 100% of novice traders in this market attest, publicly, that they never buy a coin with “low volume”.
Why is this?
What would make a human being, with adequate cerebral functionality, commit to attempting to undertake a venture in this market – knowing full and well, that they have not even one inch of a clue about what they are doing… knowing full and well that, in the altcoin market, mistakes are costly… knowing full and well that with every losing trade that they make, someone is on the other side of that exact same trade – who has profited and has successfully taken advantage of this lack of knowledge.
You see I made an analogy in a previous post…
Imagine the altcoin market was actually a game of chess. Of course then, you will have those who are experts at the game of chess who have been trained by the most renowned chess masters in the world, and therefore are themselves masters of strategy and can defeat any opponent – even with their eyes closed…
… however, there seems to be waves of people who have never played a game of chess in their lives, showing up, putting large amounts of money down, and then betting that they can defeat those who have mastered the game…
Clearly each and every one of these guys lose… again and again… and they never seek to expand their skills. They just keep turning up to the chess table and doing the same thing that they did the day before, and thus – they continue to lose. The chess masters wipe the floor with these guys.
This is what happens in the altcoin markets, day after day…. after day.
The market is fashioned in such a way, that if you can put yourself on the opposite side of a novice trader, you will make money – by default.
Novice traders actually form 99% of the participants in the altcoin market. They are in the majority.
So as an example; in any coin – novice traders will out-number skilled traders 10:1.
Therefore, each coin has the same exact dynamic. Every pump, every rally, every price advancement can be rationalized using this 10:1 ratio, e.g. with each price advancement 100 novice traders put their money directly into the back pocket of only 10 skilled traders.
This is how profitable trading crypto currencies is, when you have the information advantage.
You see, novice traders are all reading from the same playbook, therefore all of their actions in the market are brutally obvious and predictable. Therefore to win, and to win consistently, means knowing how the market really works – and then using that information to your advantage.
You must always be aware that buying should only ever be done during periods of accumulation. If you fail to buy during this phase of an up-trend, then simply skip the trade and move onto the next opportunity. It is such a crucial element to understand market phases. Those who cannot differentiate between accumulation and distribution will always and forever be the greatest losers in this market who serve to achieve only one purpose: the fattening of the pockets of skilled traders.