Understanding that your gains or losses may not have been due to your analysis is very effective in controlling emotions and strengthening the psychological power of trading. For a better understanding, consider the following two examples:
Example 1: In the illusion of being an analyst
Mohammad wants to become a crypto trader. He know cryptocurrencies well, follows the news, and has a good knowledge of economics, but has not traded. When he looks at the market and prices from a distance, he says to himself that making money from this market has nothing to do with it, and several times he has also predicted the market and it has come true. Until one day, the price of bitconnect drops by 20%. According to his own strategy, he buys a lot of bitconnects. But very soon the news of bitconnect scam spreads and this cryptocurrency drops to zero by 100%.bAnd this is how Muhammad realizes that we will not necessarily see a rise after every fall.
Example 2: Getting out of the way!
Mohammad has been in the market for some time, gaining experience and realizing that it is wrong to trade emotionally and without a written plan and careful analysis. He has learned from his previous mistakes and is now trading according to analysis and plan.
His plan worked well for a few months and he was generally profitable. But after a while, the losses begin. Most of his analyzes are wrong and have been lost.
Markets are very dynamic and constantly changing. Accidents and unavoidable events sometimes make unskilled traders profit and skilled traders lose, and this always happens.
But by having a plan and, of course, gaining experience, the risk of accidental stimuli can be greatly reduced. Do not forget that even the best traders in the world sometimes lose in a row.
By having a written trading plan and doing enough research before trading, by examining the results of trades over several months, you can guess whether you have the right strategy or not.
It should be noted that the cryptocurrency market has more random and intentional stimuli than any other market, and therefore, according to experts, trading in this market is more risky than other markets.