Building Trading Systems with Atomic Habits: Freeing Yourself from Emotions, Cognitive Biases, and Making More Objective Trading Decisions

The DeFi Edge researcher emphasizes the importance of establishing a trading system in the article, which not only protects investors from the influence of emotions and cognitive biases but also simplifies everything, making trading decisions more objective for users.

Original article link: https://twitter.com/thedefiedge/status/1503433574418059267

Making decisions in the cryptocurrency market can be exhausting, but when I understood systemic thinking, I began to make more money. Here is a tutorial on building a system in the crypto space, which can prevent emotions from killing your profits.

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The author illustrates the difference between setting vague goals and systemic thinking:

• Goal: Lose weight.
• System: What is your fitness and diet plan?
• Goal: Increase Twitter followers.
• System: Set posting frequency/time, topic selection, and details of the writing process.

Setting goals is easy, but having a good system is the key to distinguishing winners from losers.

What is a System?

The author points out that a system includes behaviors, habits, and consistent execution. Systems will propel you towards your goals. The masses are victims of emotions and biases. Designing a system is like designing an investment software for your brain, simplifying everything, making life easier, and helping investors make more objective decisions.

Here are 10 decision-making systems in the crypto space.

1. When to Buy Cryptocurrency with Fiat

The author does not look at RSI or predict the market. On the 1st of every month, they consistently buy blue-chip tokens with fiat, just like setting up automatic bill payments, saving time and energy to research other things and enjoy life.

2. Portfolio Allocation

Referencing a previous tweet, the author differentiates the risk levels of different projects. There are four portfolio allocations to consider. If a project's weight is too high, they will sell and readjust.

3. Locking in Profits

When should you lock in profits? The author suggests trying four formulas based on different risks rather than relying on time or gut feelings.

4. When to Claim Earnings?

Not all DeFi protocols have automatic compounding features. When should investors claim earnings?

The author claims earnings every Monday and Thursday afternoon, marking it on the calendar beforehand.

5. Track Everything

Data overload can lead to confusion. The author suggests:

• Keep a trading journal.
• Create a spreadsheet based on your budget.
• Use Zapper.
• Understand how to track tax obligations.

Interested in following KOLs (Key Opinion Leaders)? The author emphasizes tracking and reviewing their "calls" for accuracy.

6. Investment Checklist

Following YouTuber calls can easily lead to FOMO. Therefore, the author urges creating an evaluation protocol and project checklist to help investors stay grounded.

7. Quality of Information

Junk food is harmful to the body. What about mental nutrition? In today's world with an abundance of information, the author suggests carefully planning daily information sources to rid oneself of mental junk food.

8. Research System

Establish a formal research system. Each project review should follow this process:

• Read the whitepaper and official documents.
• Research team members and their experiences.
• Is it audited? By which organization?
• Check out the Discord group atmosphere.

9. Cultivate Habits

The author notes that having a system is not enough; investors must make the system a habit:

• Add recurring tasks to the calendar.
• Set consistent times for specific behaviors.
• The system needs to be easily accessible.
• Optimize the system when deeper insights are gained.

Note: The core concept of the Fogg Behavior Model is "B=MAP," which means the key elements to generating behavior are Motivation, Ability, and Prompt. Here, it means that when decision-making systems are user-friendly, there is sufficient motivation for profit, and users are constantly reminded in the calendar, the likelihood of behavior and habit formation increases.

10. Life-Saving Mechanism

The author mentions an operation in January:

I hate taking profits. In January this year, I was ecstatic about the success of Wonderland and DeFiKingdom. I didn't want to sell, but I trusted my system and reluctantly sold. The coin prices plummeted afterward, thanks to the system.

Viewing the Big Picture

Using previous tweets such as "Mark Zuckerberg only wears gray T-shirts" and "Jeff Bezos doesn't make major decisions after 5 p.m.," the author illustrates that systemization can effectively reduce decision fatigue, allowing energy to be focused on more critical matters. They pose some questions:

• What is your decision-making process when investing?
• When do you take profits?
• If an investment goes wrong, when do you cut losses?
• How does your system handle bull and bear markets?
• How do you track everything?

How can decisions be consistently made based on a system? The author emphasizes "don't overcomplicate it" and suggests starting with Google Sheets, Notion, and systematic thinking can refer to books like Atomic Habits and Principles.

Although it's not easy, once the system is established, life will be easier. In summary:

• Everything in life is based on systems.
• Systems shield you from being influenced by emotions and cognitive biases.
• Establishing systems allows you to analyze weaknesses in trading strategies over time.