Why do some people still lose money despite having gone through the Bitcoin bull and bear cycles?

Translated by: Vernacular Blockchain

Financial management is not only a combination of technology and luck, but also a comprehensive test of personal psychological quality and discipline. Only by keeping this in mind can you be invincible in the long-term market game.

In the current fast-changing and competitive market, how traders can stay calm, rational and formulate a sound strategy has become the key to whether they can gain a foothold in the market and continue to make profits.

The following are 8 psychological frameworks that combine market practice and psychological principles to help you penetrate market noise, improve decision-making ability, and become a more acute, focused and logical investor.

01 Conduct a "100% Cash Test"

What is a "100% Cash Test"? The "100% Cash Test" means assuming that all your configurations are converted into cash (for example, 100% is USDT), and then ask yourself: If you re-allocate your funds now, will you still buy your current assets in the same proportion?

If the answer is no, it means your allocation may need to be adjusted.

Then ask yourself: If your allocation became 100% USDT today, would you choose to reallocate funds to the exact same position you are currently in?

For most people, the answer is probably no. Yet many people have trouble taking action. Why? Because of the following psychological factors:

· Sunk Cost Fallacy

· Emotional Dependency

· Fear of Admitting Mistakes

The sunk cost fallacy is a cognitive bias where people continue to invest time, money, or energy even when it no longer makes sense logically (this also applies to relationships, projects, etc.). In trading, this means holding on to underperforming positions because "too much has been invested" (whether financially or emotionally), rather than cutting losses and reallocating to better opportunities.

Back to the question at the beginning, if the answer is no, you need to take action.

It may feel overwhelming at first, but you can start small, such as choosing a position and asking yourself: If it were today, would I buy this token in the same amount? Then, continue to evaluate the second position.

Although selling is an emotionally difficult thing, it feels like closing the door to some potential possibilities. But holding on to a position based on hope or fear will only lead to stagnation and poor decision-making.

Face the problem bravely, adjust the configuration decisively, and avoid the wrong perception that you can't bear the sunk cost. Remember, sunk costs do not participate in decision-making.

02 Keep a structured configuration

More efficient management through clear classification:

1) Core positions

Core positions refer to high-conviction investments, which means that you can withstand drastic price fluctuations and hold the token for a long time.

This does not necessarily require you to hold it for a long time, because the opportunity cost in this market is very high and the rotation is frequent. But if you think you can accurately grasp every market fluctuation, you are deceiving yourself, and you still need to believe in the long-term value of something.

2) Trading positions

This is a short- to medium-term opportunity to capture a specific trend or price fluctuation.

This position provides more flexibility, allowing for faster rotation and tighter stop losses. Everyone’s trading style may be different, and this is not limited to perpetual contract accounts.

For example, I can buy an on-chain opportunity, do a 4x swing trade (from $5 million to $20 million), and then exit. Even if its price continues to rise afterwards, I won’t care, because I have made it clear what type of trade I am doing before the trade.

If I think it may reach $1 billion (for example, due to the uniqueness of the project), it will be classified as a core position. I can accept its 50% retracement volatility because I know that this volatility is the price of obtaining excess returns.

3) Clearly classify and avoid confusion

Confusing core positions with trading positions often leads to confusion and emotional decisions. By separating them, you can more clearly understand the purpose of each position, thereby reducing unnecessary regrets.

So, classification management not only helps you stay rational, but also improves the overall efficiency of configuration and the confidence of decision-making.

03 Fewer, more focused layouts

This is an underestimated skill that only the best traders can truly master. Perhaps this is the secret to advancing from one level (such as 6 figures) to another level (such as 7 figures).

1) Core points

It has been proven that increasing positions with conviction and achieving growth through compound interest can help people retain wealth in the long run and become real millionaires more than randomly hyping a Memecoin. Every transaction should have a valuable impact on your configuration, otherwise it is not worth doing.

2) Reduce layouts and optimize management

Reducing the target will help manage the configuration more efficiently while avoiding the biggest enemy in trading - indecision.

When you need to handle 15 different positions at the same time, the psychological burden will make you feel exhausted. However, if you limit your holdings to a few (e.g., 5 at most), you will be more cautious and start to think seriously: "Is this randomly recommended token really worth investing in?" Of course, there will be some opportunities that are highly asymmetric bets (e.g., taking 1-2% risk but potentially bringing 20-40% portfolio returns). The key is not to spread your funds around randomly, but to stay concentrated and focused to bring greater returns. 3) Less is more A few people have achieved wealth growth by streamlining their layout, while others are obsessed with "collecting" meaningless short-term gains. I call these people "gain collectors." In short: either choose a highly asymmetric bet, or decisively increase your position based on conviction and take advantage of compound growth. It is difficult to achieve real success with a strategy that is free from these two.

04 Build your allocation based on your goals

Your allocation should always revolve around your financial goals.

If your goal is to grow your assets from $200,000 to $2 million in this bull market (although $2 million may not be enough for retirement, it is still a worthy goal for most people), then every decision should bring you closer to this goal. Ask yourself:

· Does this transaction substantially help achieve my goals?

· Or am I just blindly chasing the rise because I am afraid of missing out?

1) Stay focused and avoid misjudgment

Lack of focus will reduce your judgment. It may seem tempting to invest $5,000 in each opportunity, but consider the following costs:
· This investment may have a negligible impact on your overall allocation.
· It will consume a disproportionate amount of your time and energy (for example, using 20% ​​of your attention to manage an investment that only accounts for 1%).

2) Abandon unrealistic fantasies

Most people buy into a token just to expect it to reach the "magic number" in their minds: "I need this token to increase 10 times." This wishful thinking will only hinder your judgment and will not help you achieve your goals.

Instead, you need to clarify your goals and judge whether you are working towards them. This is crucial and worth repeating.

In summary, before investing, clarify your goals first and make sure that every decision is in service of your goals, rather than being led by market sentiment.
Translation: One of the biggest mistakes people often make, and one I have experienced myself, is wishful thinking. You know, the mentality of hoping that something is true even if it is not actually true. You choose to ignore the facts just because you prefer to believe that it meets your expectations. This is a trap that is difficult to avoid. - Elon Musk

05 Focus on your strengths

You have come this far because you are using your strengths - sticking to it.

For example, I have made significant improvements to my configuration through several successful on-chain configurations and with the help of compound interest growth. As the size of the portfolio increases, liquidity may become a challenge, but turning to higher-market-value assets is not necessarily the best solution.

1) Maintain your core strengths

As you progress in the market, you will find yourself facing competitors who have sharper and more professional advantages in larger markets. Don't assume that having a larger allocation will automatically make you a perpetual contract trading expert.

If your success comes from on-chain allocation, then continue to dig deeper into this area. Unless your allocation scale reaches a very high level (such as more than 5 million to 10 million US dollars), liquidity is usually not a problem, such as 7-8 digit liquidity pools and 7-8 digit 24-hour trading volume, which can fully support your operations.

Similarly, if you perform well in Memecoin or AI themes on Solana and Base chains, there is no need to switch to liquidity staking on Sui chain. Focus on your strengths to achieve growth more steadily.

2) Avoid deviation from familiar areas

Assuming that the market trend continues without a clear turning point, rashly entering unfamiliar areas often brings the following problems:

Low belief: Due to the lack of sufficient understanding of the new field, you tend to avoid risks, thereby allocating less capital and reducing potential returns.

High cost: Exploring new areas requires learning their rules and operating methods, which will consume a lot of time and energy and distract your attention.

These problems will not only weaken your efficiency, but also reduce the overall rate of return.

The key next is how to focus more on your own areas of strength and use existing successful experiences to further enhance competitiveness and achieve more stable asset growth.

06 Don’t try to trade against the trend

The reason why trading against the trend is attractive is that those who can successfully catch the turning points of the market often win a high reputation, such as accurately judging the high point of LUNA, the top of the market cycle or the bottom of SOL. However, trading against the trend can only bring benefits at key turning points.

In a bull market, the market momentum is strong, and what you need to do is to increase your position and help the market, rather than trying to "put out the fire".

Unless you are George Soros or GCR - but obviously, you know whether you are or not.

1) Why is it difficult to trade against the trend?

Trying to catch every market turning point will not only make you physically and mentally exhausted, but it is also likely to backfire. Statistically, the chances of success for such an attempt are extremely low. Be realistic—otherwise you wouldn’t be here reading this.

Instead of obsessing over predicting every turn, focus on the market trend, take steady steps, and magnify your gains through compound interest.

2) It’s wise to go with the flow in a bull market

In a bull market, it’s wise to go with the flow. The trend is your friend, don’t try to fight it. Follow the trend and take profits when the trend ends. The market is not for heroes, but for rational people to achieve steady growth of assets. Your goal is not to become a “market prophet” as people say, but to make your returns continue to increase.

In other words: instead of trying to accurately predict every turning point, it’s better to go with the flow. Even if you occasionally endure a little retracement, you can confirm the trend and seize the opportunity.

The cost of missing out on huge gains in a bull market is often much higher than short-term fluctuations. Let go of your obsession with contrarian trading, follow the trend, and focus on achieving your goals.

Translation: It's easy to be a contrarian, but it's hard to be a contrarian who can make money.

07 Develop trading logic, set stop loss criteria, and stay emotionally calm

Tokens are just tools to achieve financial growth. They are neither loyal nor "care" about you. When evaluating new opportunities, be sure to record your trading logic and strategy.

1) Trading logic

Clarify why you buy this token:

· What is the reason for you to buy it?

· Is this a transaction based on some catalyst?

· Are you betting on information asymmetry, or do you think the market is fundamentally mispricing it?

· Or is it just FOMO because your favorite KOL is promoting it?

2) Stop-loss criteria

Clearly set an exit criteria, whether it is a price target, a time point, or a change in market conditions.

Key: Take the emotion out of it. Remember, this is not a personal battle, but a business.

Imagine this scenario:

You bought XXX Token at $50,000, it once rose to $200,000, but then fell back to $50,000. At this point, your trading logic has been negated. Your allocation has also shrunk from $500,000 to $350,000 (assuming it was at the local top in December).

At this point, you face two choices:

· Continue to hold the losing position, hoping for a rebound without clear basis, just to get back the money;

· Decisively stop the loss, reallocate funds to more promising opportunities, and seek new growth points.

3) The goal is to grow the allocation, not to be loyal to a certain token

If you find a better opportunity, adjust the position decisively. Even if you regret the previous token, if the new allocation achieves a 2x return, that regret will soon disappear.

The key is the result, not the "loyalty" to a certain token.

Put aside promises, hopes, and unrealistic fantasies. Selling a crypto asset does not mean the end - you can always buy it back at the right time.

4) Calm trading is the key to success

It sounds simple, but the crypto market is a place where people have extremely emotional attachments. If you can use this well, you can gain an advantage. But at the same time, you must always act around the goal: to keep the configuration growing.

No matter which token the income comes from, the important thing is the increase in total assets. Remember: Maximize Profits > Community Feelings.

08 Decouple from the results of the transaction and avoid self-blame

The quality of a transaction cannot be measured simply by the results. A good transaction is based on the best information available at the time and a well-thought-out decision, rather than simply defined by whether it is profitable in the end.

If your trade is not a gamble, but follows the following elements:

· Have a clear trading logic

· Set clear stop loss criteria

· Have appropriate risk management, and make it clear whether it is a core position or a short-term trade

·   Under favorable conditions, such as a good risk-reward ratio or asymmetric potential

Then it is a reasonable trading decision regardless of the final result.

Also remember to avoid excessive self-blame or internal consumption due to the trading results. After experiencing losses, people often tend to fall into a vicious cycle of self-criticism, but this mentality usually ignores the importance of rationality in the trading process.

Losses are an inevitable part of trading.Even carefully designed trades sometimes fail, while conversely, some thoughtless trades may succeed by chance.

I myself have blamed myself excessively for a failure, but later realized that the trade was actually reasonable and in line with my strategy. However, this excessive self-blame will only bring unnecessary pressure, leading to misjudgment, indecision, and even emotional trading. Eventually, you may fall into a vicious cycle and begin to doubt whether you "always make mistakes" or feel that others always do better than you.

09 Summary

Writing this after countless reflections on mistakes is also a summary and warning to myself. The past is the past, and the only thing to look forward to is the future. Past decisions, whether successful or failed, are to make you do better next time, rather than letting them consume you.

If you have performed well so far, that's great. If not, that's okay - in this market, there is no growth without failure. Behind every success story, there is a price that must be paid.

Remember: the meaning of trading is not how many waves you "catch up" or even who makes the most money. What really matters is how you respond to each trade, whether you achieve your goals, and whether you can keep your wealth when the market crashes.