# Avoiding Trading Psychology Traps (Live streaming in progress - follow the host to understand trading psychology)

## I. Market Sentiment Cycle: From FOMO to Panic
**Core manifestation:** Anxiety-driven chase on rallies (FOMO), panic selling on declines, trapped in "buy high, sell low" cycle
**Root cause:** Linear thinking — mistaking short-term price action for long-term trends
**Key to breaking free:** Understand market cycles, practice Buffett's "be greedy when others are fearful, be fearful when others are greedy"

1. **Loss Aversion**
* "If I don't sell, it's not a real loss" leads to holding losing positions
* Sunk cost fallacy: investing more capital to break even
* Pain of stop loss far exceeds pleasure of taking profits

2. **Anchoring Bias**
* Anchored to historical highs, believing "it will always come back"
* Deceived by "original price vs. current price" comparisons
* Over-relying on past performance to predict the future

3. **Herd Mentality**
* Abandoning independent judgment, blindly following the crowd
* Becoming the "bag holder" at bull market peaks, the "panic seller" at bear market bottoms
* History repeats: from tulip mania to cryptocurrency bubbles

## II. Rational Decision-Making System: Five-Step Framework

1. **Establish Valuation Anchors**
* Use metrics like P/E, P/B to judge asset valuations
* Stay vigilant when overvalued, position when undervalued
* Price blindfold test: ignore historical prices, focus on intrinsic value

2. **Implement Investment Discipline**
* Pre-set take-profit and stop-loss levels, execute strictly
* Eliminate the struggle of "should I sell?", let rules execute automatically
* Beware of "illusion of control" — thinking you can beat the system

3. **Embrace Probabilistic Thinking**
* Every trade is a random event
* Evaluate your system over 20-50 trades as a cycle
* Stop obsessing over "predicting correctly", focus on "executing correctly"

4. **Reshape Review Mentality**
* From "mistake notebook" to "correct notebook": process matters more than outcome
* Profits may come from luck, losses may stem from low-probability events
* Treat every investment experience equally

5. **Cultivate Patience**
* Overcome the natural tendency for impatience
* Data proves: the longer you hold, the higher your probability of profit
* Extend your time horizon; peaks are just small ripples in long-term trends

## III. Core Principles
* **Markets never change because human nature never changes**
* **Successful investing isn't about beating the market, it's about beating yourself**
* **Transform from a slave to emotions into a master of reason**
* **Plant seeds when no one is paying attention, harvest when the crowds gather**

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