All the normies are aping into AI right now. These are the same degen traders who were aping into overpriced NFTs in 2021 and overhyped Metaverse tokens in 2022.
These kinds of traders are so-called trend-chasers constantly looking for the next big narrative. Trend-chasers are doomed to get rekt and the scientific field of behavioral finance explains why.
What Is Behavioral Finance?
Being biased is something we like to accuse others but in the end, we have to admit that we all are biased. Biases are irrational beliefs that influence all your decisions, also your trading and investment decisions.
In other words: You can trade and invest in whatever you want but you can not always want what you want. The reason for this is the lack of freedom of will in a biased mind.
These biases affect all areas of our lives. One of these areas is the making of financial decisions and biases can end up costing you a lot of money. Overcoming these biases is extremely hard but it is worth a try.
There is actually a whole scientific field called behavioral finance that combines psychology and finance.
Knowing about behavioral biases that lead to bad financial decisions helps you to reduce and avoid them. One of these habits that lead to poor trading and investment decisions is trend-chasing.
Trend-Chasers Get Rekt
I figured out two different types of trend-chasers. This first type of trend-chaser is constantly looking for the latest narrative. In 2020, they found DeFi. In 2021, they found NFTs, in 2022 the metaverse, and this year, they found AI.
The second group of trend chasers is even worse. They are the degen traders who invest in tokens that just have pumped the hardest.
Both types of trend chasers are constantly driven by a feeling of FOMO. They fear that they missing out on the hot trends while everyone around them is getting rich. FOMO is the worst. It leads to hasty investment moves without proper research or logical thinking.
Jumping from hype to hype and investing in spectacular overpriced coins is the best way to trade yourself poor.
My Final Thoughts
It is understandable that you like to follow your intuition which is human after all. However, this works when you are looking for a sexual partner but does not work for financial decisions. Jumping from hype to hype is dangerous to your portfolio and will end up losing you a lot of your hard-earned money.
It is important to check your own biases to avoid bad investment decisions in the future.
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