Hi YXI friends,

Crypto has made a “surprising” overnight rally, right after WSJ announced a Crypto Winter. Inverse indicators on news headlines don’t get better than that.

Human psychology is interesting. There is a lot of cognitive dissonance when we are dominated by fear and greed.

We are risk-averse once we get into a winning position, trying to protect our gains by cutting winners early and becoming defensive. This is not only true in trading, but also in sports and other binary-outcome (win vs loss) endeavours.

At the same time, we are loss-averse but risk-seeking when in a losing position. This means we hate crystallising a small loss and are willing to “ride it out” or “double down” to get back to breakeven, hence more risk-seeking.

However, we rarely do this in other situations. For example, I’ve never heard someone say, “that restaurant tasted so bad we MUST go back” or “this dish is so good I would NEVER order it again to ruin my memory”.

On the flip side, there is the recency bias. Recency bias occurs when we assume the current situation will persist forever, whether good or bad. Remember the screenshots of the triple-digit and 7-figure YTD P&Ls everywhere on X in October? They shed a minimum of 50% of their portfolio value within the past month after celebrating too early. Then everyone flipped SUPER BEARISH, with the Fear index in the single digits and people calling for new lows every day.

Neither of the above traits is helpful in trading. The key is to stay level-headed and maintain a game plan in any market condition, regardless of trading style.

This service aims to help you overcome these psychological danger zones by offering not only a unique set of tools unavailable elsewhere, but also detailed commentary that consolidates all the analysis into a coherent picture. Anyone can be wrong at any time, but we stay calm under pressure and navigate the chaos in a puzzle-solving manner.

DISCLAIMER: This newsletter is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

Please check out our glossary for explaining the acronyms, financial terminology, and economic data.