Icrypex Treasury Specialist Helin ÇELİK evaluated the reasons that affect investors cognitively in crypto
money investments in the publication she made with the crypto money YouTube channel Crypto Sözlük. We have listed the prominent reasons mentioned by ÇELİK under the articles for you.
1. Thinking the best about investing
ÇELİK stated that with this article, the investor can sometimes miscategorize his risks and expectations. Pointing out that this causes the investor to take more risks than he can accept, ÇELİK said, “It may be possible to result in a loss because we make our investment and hope for the good and we are positive, we think about profit and we cannot take the risk into account. Here it may be the case that the expectation and the risk do not match, maybe we open too many positions and such situations can happen.”
Historical Data Should Be Evaluated Objectively
2. Selectivity in perception
Helin ÇELİK states that it is possible for investors to have the same expectation with the same variation in cases where they have experienced losses or gains in the past based on their previous experiences and continues “We need to evaluate the data in a free way. Our experiences can play a very important role in our next steps, of course we will remember, but we need to evaluate the data in a purely positive and objective way. Selectivity in perception can influence and be reflected in all our investment decisions. It’s difficult, but not impossible, for us to let go of emotions.”
3. Intuitiveness
“Intuitiveness often arises in situations of uncertainty. Human beings tend to act on their own intuition when they cannot predict, this has been the case throughout history. There is a situation where we do not know the end and we inevitably engage our own intuition. The reflection of this behavior in terms of investment is to copy someone else’s decision. We can do what someone with a good investment is doing, but he may be making a mistake at that moment and we may have opened our transaction incorrectly. We need to do intuition by doing more research, making our own decision, and sticking to the decision we made.”
4. Cognitive bias
We have a bias mechanism that we carry in our brains that will lead to the wrong conclusion. When this comes into play, irrational behaviors can occur, and we do it whether we want to or not. Again, it is a phenomenon that comes from past life, from memory, created by our own memory. Our brains have a tendency to adopt shortcuts. We are living something in the past and it takes a shortcut from there to the present. In this way, our prejudices are formed. There is a concept called anchoring anchoring. If there are previous problems, it can have an impact on the new decision. In crypto money investments, despite the new information, the person cares more about the old information. If we look at it for now, there is Covid-19 and the developments here can basically have an impact, but we can only create a shortcut on the basis of levels and without considering what the market is pricing in, without accepting it. Since we cannot get out of the incident we have anchored, we can be more stubborn in our investment despite this new data. And that’s a cognitive-processing factor, one that holds us back.”
4. a) Overconfidence
Overconfidence, when we look at it factually, is something that can move people forward in some cases. Overconfidence in the investment wing can cause the investor to evaluate the risks as unimportant. You can increase the number of positions opened in the financial markets, you think that each position opened will go to the plus. We assume that our information is completely accurate.
4. b) Avoidance of ambiguity
The investor is afraid of anything he does not know, and the investor tries to choose the path he knows best. It’s a path it takes because it avoids uncertainty entirely, but that can lead to losing. We have an instrument and news effects in front of us that we do not know. There are little news pieces that we know, and we start from what we know, we are afraid of what we don’t know. What we don’t know can also mislead us. Because we run away from what we don’t know, because we don’t fall on it, we go in the wrong direction, we get into a situation we don’t want. We need to search for sources and make the combination.
4. c) Representation – reference effect
There are some samples, we try to see the big picture by looking at a small part of these samples, we take them as references. This is reflected in the overall investment. In fact, maybe there are many other factors in the current situation, but we may not see it, which can cause us to lose sight of the real possibilities.
As for the issues that will be solved to these, Helin ÇELİK finally said, “It is important to make technical, fundamental analysis and to stick to it, to make cost calculations. As the position increases, there may be unforeseen costs in the opening and closing, and we need to calculate the cost of our own positions. It is important not to be stubborn with discipline and the market. It is necessary to make the right analysis and perform risk management well.”
Check out our related article for the correct management of psychology in crypto money investments
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