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The Psychological Anatomy of Shitcoin Trading
Hodl is the word! Lately been on Facebook? Telegram? Reddit? No? Any other social media platform? Surely you are subscribed to a discussion group on any platform to satisfy your needs for juicy crypto info. People hear more and more about other people who made some decent money fast with crypto and want to get in, which is no wonder – they want their part of the cake. So far so understandable; however, what happens on social media is no fun anymore; it is dumb.
Table of Contents (click to expand)
TA
Technical analysis (TA) is very close to a gamble when it comes to low-volume coins. One has to understand that technical analysis relies on volume and liquidity of the markets; furthermore, it often reflects the algorithms of big institutional traders like banks or big hedge funds – and last but not least, the emotions and sentiments of the traders.
That works for FX, but do that on dead shitcoins, and you are going to be burned. But coins with high trading volume in crypto also rely heavily on emotional behavior and are therefore hard to predict, maybe a bit like your girlfriend when she gets emotional. You know her, yeah, but the reactions tend to be different from what you expected.
Look, this coin floored since days, consolidated very deep – it MUST breakout!!!One!11!!!
Yes, likely to break out south, though – as the rest of it is rare holders recognized they have some capital bound onto a dead fish and want to get at least something out. This is also one reason why it is dumb to say HODL on each and every coin. “I have 10k dogecoin, what shall I do?” Reply: “HODL!!!!” – Heck, no – you should not HODL a dead coin; this makes no sense. Let's be honest, it often happens like this:
Facebook Group participant Fred :
$ASScoin is going to moooooooon sooooooon. Very good whitepaper, I read all the details, great team with many *vic -ending names, fantastic tech, so complicated I don't even understand what it is about. Hop on, this is gonna be a $10 coin easily in a few month. #lambo #moon #hodl
Newbies are reading it, desperate wannabe-overnight-rich action takers are reading it, and a fraction of them will comment on it – many will just buy silently, not doing any research at all. Why take the effort? Fred has it already done and vouched for it. Hey, he has 1k Facebook friends; can't be wrong at all. Despite the coin's low volume and the many groups Fred has posted about this, they generated a small spike in $ASScoin.
Some recognize what's going on and sell off again quickly, feeling dumb, but ok, just a few dollars in fees and a bit of rate loss. Others, though, are still waiting for $ASScoin to skyrocket, having $50 in it; the Lambo dealer's order form is already pre-filled, but nothing happens. Now all these people sitting in Reddit, forums, Facebook, and Telegram groups are seeing another follower of Fred asking
Ouch
Hey, whatcha all think will $ASScoin moon soon?
The question hits the 30 others that bought $ASScoin as well, some maybe with more significant money, and some might have thrown the kid's college money or their pension on it.
YES, just HODL, HODL FOR YA DEAR LIFE, MOON soooooooon, then lambo for everyone. HOOOODDDLLLLLLLLL I am all in! CAN'T go wrong!!!!!1111!!!!!!!! It is only a loss if you sell at a loss!!!!11!11ONE!! It is at discount rate right now!!!!! I am selling my wife, the kids and my kidney to buy morreeeeee!
Seeing this kind of dedication, the newbies just don't want to be the noob that sells at a loss and holds tightly. Even throws some extra packs on it, but waits and waits and waits. No moon, no Lambo, just hodl. The thing the newbie has fallen for was the dream, the emotion of another one. Everyone can publish everything in the internet. There are many reasons why you will find wrong information within the cryptoverse:
- Newbies that want to appear as pro, seeking to get attention
- Wrong TA (Technical Analysis) applied
- Correct TA applied to no-volume charts, bad price action
- People actually trying to convince themself, that their decision to hold is the correct one. Sellers are weak hands; only hodlers are right, generally speaking
- Paid advertisers posting to groups to push ICOs
- People want to push their held shit coins
- People spreading myths/beliefs that they just overtook from someone else
- Pump and Dumps
Strategy…
It is all about the strategy you use and not falling for experienced traders exploiting low volumes for pump-and-dump actions. First of all, we need to take a differentiated look at how you manage your money. Decide whether you want to invest or day trade.
Investing
You do your research on projects, allocate a defined percentage of your funds to the project, and buy tokens for it. First, think of how many projects you will be able to follow in the long run. Subscribe to their social media channels, website RSS feed, and GitHub. Let's say you think you will be able to follow 5 projects, so you split your total amount of funds by 5 and use each portion for one project you want to invest in, by buying their tokens. Oh HODL!
Before you buy anything, you want to do your research; a basic overview can be achieved by asking these questions: 1. Which problem does this project solve? And has it a realistic chance to do so? 2. How is the realization of it, is there something done already like an existing MVP? 3. How is GitHub activity? 4. How is the team? 5. Is there an actual use for the token itself? You can follow the very detailed and effective methodology of Cryptohydra. Then you put a % of your allocated money into it and simply forget about the price of the coin,
just follow the news of the project to check if it is doing any good. Alternatively, if you want more action, you can create a portfolio and track price movements. Once you see a 100% increase, you could withdraw 50% and leave the rest in your wallet. This 50% can be used for new projects you like to invest in. So you diversify more and more over time. Diversification is key if you want to grow your account hands-free. Theoretically speaking, you spread your money across promising projects and hope that some of them skyrocket, offsetting losses on others with profits.
Trading
If you want to day trade coins/tokens, you'll want to be extra careful. Technical analysis might help with coins with high volume like BTC, but will rarely give you reliable information on $ASScoin. Be prepared for a long and painful road if you want to learn it. However, it is advisable to learn some basics, such as support & resistance, to identify good entry points for investing (as in the prior paragraph) to optimize the outcome. If you want to take a deeper look into day trading, Coinigy could be a first step into learning it.
Big TALK of HODL!
Some words I found on Bitcointalk. Obviously, I don't agree in every case with it, but I found it entertaining enough to share:
I type d that tyitle twice because I knew it was wrong the first time. Still wrong. w/e. GF's out at a lesbian bar, BTC crashing WHY AM I HOLDING? I'LL TELL YOU WHY. It's because I'm a bad trader and I KNOW I'M A BAD TRADER. Yeah you good traders can spot the highs and the lows pit pat piffy wing wong wang just like that and make a millino bucks sure no problem bro. Likewise the weak hands are like OH NO IT'S GOING DOWN I'M GONNA SELL he he he and then they're like OH GOD MY ASSHOLE when the SMART traders who KNOW WHAT THE FUCK THEY'RE DOING buy back in but you know what?
I'm not part of that group. When the traders buy back in I'm already part of the market capital so GUESS WHO YOU'RE CHEATING day traders NOT ME~! Those taunt threads saying “OHH YOU SHOULD HAVE SOLD” YEAH NO SHIT. NO SHIT I SHOULD HAVE SOLD. I SHOULD HAVE SOLD MOMENTS BEFORE EVERY SELL AND BOUGHT MOMENTS BEFORE EVERY BUY BUT YOU KNOW WHAT NOT EVERYBODY IS AS COOL AS YOU. You only sell in a bear market if you are a good day trader or an illusioned noob. The people inbetween hold. In a zero-sum game such as this, traders can only take your money if you sell. In short just phucking HODL!
Mandy More
