If you have ever traded any asset class, then you’ll know that it is a very emotional and psychologically taxing process. When I say emotional, I don’t mean that it makes you want to cry. I’m referring to the unsolicited emotions that creep up on you which stop you from making logical decisions when entering and exiting trades. Succumbing to these emotions may certainly feel like the right thing to do in the moment, however more often than not, they will be the deciding factor in whether you end up holding the bag or not.
Let me give you an example if you’re unsure what I’m talking about. Looking at the chart below, if you had entered the red square and rode the upwards momentum, you would likely have started to feel greedy. This greed would mentally torture you and tell you that the price will keep ‘skyrocketing’ forever, discouraging you from selling and taking profits. Most of the time, pumps are followed by corrections. If you don’t sell because of greed, the token’s value will have dropped to the same as the entry, which ultimately means that money would have been lost because of fees.
Alternatively, if you were watching the chart and saw the project pumping, it’s likely that you would start feeling a serous sense of FOMO (fear of missing out) at the blue square, If you had succumb to this FOMO, it may cause you to buy in because you’ll think that the value is going to keep appreciating. Unfortunately, if you entered here, you would have been a smart trader’s exit liquidity and then left holding a value depreciating NFT token (holding the bag).
So what are the lessons here? There are two fundamentals of NFT trading that everyone must know. These are:
- Take profits aggressively.
- Never trade with emotions.
Point 1 is self explanatory, although it’s not as easy as it sounds, especially when your emotions begin to get the better of you. To be successful, you must be ice cold when trading.
In no particular order, here are my top 5 tips on emotions and signals.
Greed = Sell
Greed, one of the 7 deadly sins. This emotion is one that will creep up on you when you’re in profit and everything is working in your favor. Your NFT token will be ‘mooning’ and all you will be thinking about is how you’re going to spend your new fortune. Your mind will tell you that the token is going to keep increasing in value forever, which means that you will not want to sell.
Let me tell you straight, 99% of the time unless it’s the next ‘blue chip,’; your token will not keep going up forever. It’s likely that it’ll end up dumping within a few hours, days, or weeks. For this reason, it’s super important to know that when you start to feel this euphoric greed, it’s time to consider selling. After all, profit is profit. You’d much rather exit a trade with an x3, even if you missed an x5, rather than holding the bag to 0.
FOMO = Do Not Buy
FOMO is the bane of many NFT traders’ lives. FOMO will create spontaneous urges for you to ape into projects before you realize what you’re doing. If you see the value of an NFT token, cryptocurrency, or any other asset shooting up, you will likely want to get involved. Usually, if you see or hear of an asset ‘flying,’ it’s already too late.
If you succumb to this FOMO and buy-in, you will likely buy near the top. For this reason, if you begin to feel an intense sense of FOMO, then please check all secondary market metrics to ensure that you’re not going to be used as someone’s exit liquidity.
Legendary investor Warren Buffet once said, “be fearful when others are greedy, and greedy when others are fearful.” Giving into FOMO is essentially buying when others are greedy; in other words, a terrible idea. This is sound advice, and we should all listen to it.
Anger = Step Back
If you ever get wrecked and end up losing money on a trade, then it’s likely that you are going to be feeling anger. Trading with anger encourages people to revenge trade in attempts to make up for the losses that they have incurred. Usually, revenge trading only leads to more losses, leading to more anger. The vicious cycle continues.
If this happens to you, a good idea would be to step back, have a day or two off and then return with a clear head. The goal of NFT flipping is to stack capital, not throw it in the fire.
Impatience = Research More
If you’re an NFT degen, you’re probably familiar with ‘itchy feet’ feelings of impatience. In this society of instant gratification, we all want everything yesterday. Feelings of impatience tempt many to enter trades before they have done their due diligence, simply because they cannot wait longer.
While you may occasionally get lucky, most of the time, ape-ing in without doing proper research will leave you in the red. DYOR (do your own research) is such a cliche phrase in Web3 culture, but it’s said for a good reason. If you’re feeling impatient, please exercise caution and do more research before blindly buying into an NFT collection.
Confident = Be Cautious
When you go on a winning streak of flipping NFTs, it’s easy to become overly confident and think that everything you touch will turn to gold. This euphoric feeling can quickly lead you to having incredible confidence, resulting in you taking on far riskier trades. While this is a good thing the majority of the time, it’s always worth paying attention to. Even if you go on a significant winning streak and multiply your entire net worth, we’re all only ever one bad trade away from becoming broke.
What I mean by this is that if you’re feeling on top of the world and you overinvest into a project which goes to 0, then all of those wins that led you here will count for nothing. The key is always to trade smart, not hard. Never invest what you cannot afford to lose and never overinvest in a single project.
There we have it, my top 5 emotions and signals. If you’re starting your NFT flipping journey, I’m glad you have read this, as it could save you from a few losses. If you’re an experienced NFT trader, then no doubt that you would have felt some, if not all, of these emotions when trading.
I have been trading NFTs for a year, and this piece comes from experience. This article is a success if I can help one person improve their flipping ‘game.’ I hope that the mistakes that I have made can help someone else avoid them. Stay safe out there!