Short answer: Get informed, make a decision, act on it, move on.
Long answer:
When you are in a situation when you are unsure how to proceed next not because of the lack of ability but because you have a multiple choice answer and you can't decide on one of them, what do you do to go forward?
Well, it depends on the topic and how much importance you put on the it. For example, if you have to decide on the color of your sweater, some people will pick the first one that comes on hand without giving a second thought on its color, while others may think how does it fit with the rest of their clothes, shoes, and where they are going. So, for some may be a lengthy process choosing their outfit for each situation, while for others it's an afterthought, maybe.
For most people, choosing what to wear is almost an automatism, but others make conscious decisions about that and may spend time debating at every step of the way.
Even in this case, you might need to get informed before making decisions, even if you don't care what you wear. It's not the same if it's sunny or raining, or if it's windy or calm outside. Of course, it matters less if you jump into a car and from the car into another building. But for the situations where you'd spend any amount of time outside, you'd probably want to look at the forecast to see what to wear.
Source - Choosing the next vacation spot can be a very challenging task sometimes...
How Does This Apply to Financial/Crypto Markets?
In the example above, when you have to choose the color of the sweater, you generally pick one. Either that, or you decide for a shirt and possibly a suite. But you don't stay at home because you can't pick what to wear, right? Oh well, maybe not always...
In financial or crypto markets there are times when you don't know what to do. But unlike the example above, you have the option to not do anything too, and it can be perfectly ok.
Let's take bitcoin right now, but the same type of situation extends to any cryptocurrency or financial instrument.
Bitcoin is at 92.5k and a person looking at it has this options:
- buy, thinking this is potentially the bottom of the dip
- sell, thinking it would drop much further
- hold, either because they can't decide either way based on the information available to them or because they decide it's too risky (for them and their strategy) to take one of the previous actions
Holding is equivalent to no action.
The previous decision is more complicated than it seems. First of all, why Bitcoin? There are many other choices. One has to decide Bitcoin is where they want to act. Then, why at this price? Why not at 95k or at 85k? This is where TA as well as news and market sentiment give some hints, but not definitive answers. People who want to avoid making such decisions, use the DCA method, both to buy and to sell.
And then, deciding upon the action itself (or non-action, in case of holding).
Of course, if one buys, they also need some sort of idea when they'll sell (or under what conditions).
The decision needs to be relatively swift, even if it is to hold. There is such thing as analysis paralysis, where a person is trapped at the analysis/informative stage and never reaches decision stage, often being afraid of making a mistake or waiting for an improved outcome until the window of opportunity passes.
After a decision is made, it needs to be put into action. Here's where at least for important decisions or long-term investments, one could sleep on them to see if they change their mind until the next day. But postponing for too long is not a good idea as conditions might change. You either act on it or drop it.
The swiftness in decision and action allows a person to move on, to not constantly revisit this decision process without going anywhere. If they follow a system that generally works for them, that also prevents them from blaming themselves if their decisions based on the information they had available at the time turned out to be wrong.
Posted Using InLeo Alpha
