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Published On: Jun 26, 2024
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Emotional Impact on Crypto Trading: Managing Stress for Better Decisions

Impact of Emotions on Decision-Making: Psychological Indicators of Stress and Their Effects on Trading

Emotions are a key factor in the path of every trader to succeed in the market. Traditional trading and crypto trading in general lead to behaviors that can be out of the control of a person in this activity. To have mental strength is very important to keep calm in volatile markets.

Paper trading and real trading are different environments that need different executions. The transition to live trading will require more than just applying what was learned during paper trading.

A trader who experiences significant wins may feel the same level of emotion as when they experience losses. Both situations can lead to a loss of control over the trading plan and the execution of future trades.

Psychological Indicators of Stress and Their Effects on Trading

Understanding Emotions in Trading

Here are the key emotions involved in trading: fear, greed, hope, and stress:

  • Fear: Is the emotion that keeps a trader away from entering a good position or adding to a winning position and exiting from it prematurely.
  • Greed: Is the emotion that clouds the rational decision-making process of a trader when he is experiencing overconfidence.
  • Hope: This case can be seen as the act of not accepting reality and taking a loss quickly or not entering a position and waiting for the price to come to a better quotation.
  • Stress: This is the physical and psychological state where the trader experiences a mix of constant worries over the trading performance.

Emotions play a huge role in how traders make decisions, and they can even cloud completely the judgment of a trader.

The key here is to be aware of your emotions and how they might be influencing your decision-making process. Traders must develop strategies to manage their feelings and make more rational choices.

One of the most respected figures in this field is Dr. David Paul, who discusses trading psychology deeply and has full conferences on that topic.

Understanding Emotions in Trading

Paper Trading Emotions VS Real Trading Emotions

While trading live, a trader will experience serious periods of stress. It is necessary to learn to identify patterns and behaviors that might act as indicators of psychological exhaustion.

In the context of trading specifically, to recognize these indicators, a trader could:

  • Start to change from one asset to another without fundamental reason.
  • Open and close several positions without any signal to do so, and before it hit stop-loss or take-profit targets.
  • The trader starts to think it is time to change strategy.
  • Tools and techniques for monitoring stress levels.

To be able to monitor factors or signals of stress during trading, it is necessary to pay attention to bodily responses like:

  1. Increasing heart rate.
  2. Extreme sweating.
  3. High muscle tension. 
  4. Headaches.

These can be early warnings to take a break and calm down.

Paper Trading Emotions VS Real Trading Emotions

Transitioning from Paper Trading to Real Trading

Trading with virtual money will not let a trader experience the real pain of losing money. A virtual environment could lead a trader to take some position sizes that in reality it will not be able to manage.

The transition from a virtual environment to live trading will make the trader take into account the wrong assumptions made during paper trading, like:

  1. Increased risk tolerance.
  2. Analysis paralysis.
  3. Emotional overreaction.
  4. Breaking trading discipline and trading plan.
  5. Focusing on short-term gains or the gains the trader made in paper trading.

The best way to overcome these situations is to build discipline habits and follow the trading plan appropriately.

Transitioning from Paper Trading to Real Trading

Strategies for Managing Emotions

Some practice of cognitive and body techniques include:

  1. Mindfulness and meditation to "stay in the present".
  2. Behavioral Techniques (CBT) that help traders identify irrational thoughts.
  3. Deep breathing and progressive muscle relaxation for stress reduction.

Following a methodical plan is crucial, as it helps establish a routine that keeps traders constantly aware of when they are deviating from the rules.

These rules should stipulate all the conditions for when it is acceptable to enter a trade, things like position size, risk-reward, patterns expected, and so on.

Emotional responses could lead to compulsive behaviors that will rush those rules, hence falling into indiscipline acts.

Altrady’s platform has a full library discussing these topics in depth that will help any trader to cope with the right emotional management.


So far, trading is a high stress activity that requires planning and emotional management.

Transitioning from paper trading to live trading will demand assessing all issues according to emotional and psychological strengths.

You could read the Altrady library as well as watch Dr. David Paul conferences on this topic.

Although trading is challenging, it's important to understand that it's not impossible. By following a trading plan and utilizing the techniques outlined here, you can meet high expectations as a trader.


Catalin is the co-founder of Altrady. With a background in Marketing, Business Development & Software Development. With more than 15 years of experience working in Startups or large corporations.