With the crypto markets operating 24/7, it is easy to be overwhelmed by it all. You can feel captivated by the constant price moves.
FOMO is a concept that applies to life in general, not just to trading. Nevertheless, the financial markets are a place where FOMO is especially common. FOMO stands for the Fear of Missing Out, but the acronym has been used so much to the point that it is now considered a word.
In trading, FOMO is often associated with traders worrying about missing a move or a trade, regardless of the situation. FOMO gets especially strong when the market rallies without you. It will tell you to buy in as prices increase, even though your brain will tell you it is unwise.
In any case, the inexperienced trader will let FOMO win, and buys into a strongly overbought token, only to be left holding a coin at ridiculous prices.
However, it is not just inexperienced traders that have to deal with FOMO. Even professional traders and major investors encounter the same feelings and will feel like they should be riding that strong move. Everyone feels the same desire to participate in every rally, but experience will tell you to listen to your trading systems. FOMO gets stronger as the price surge continues, and it is usually when the majority caves that the market finds its top.
FOMO can also be triggered by news, or something as simple as when a friend tells you about this great stock he just bought. Twitter, Facebook or Instagram can also be great sources of FOMO. This FOMO everywhere can be a problem, because it makes you forget about that same trading system.
In short, FOMO makes you trade by following your emotions of greed, fear,and envy, instead of the systematic approach you normally use. A recipe for tears.
How to Deal With FOMO?
Controlling FOMO is a journey every trader is on. No matter how experienced you will become, FOMO is always just around the corner. Turning it off is impossible, but there are ways to help your brain win the fight against your emotions:
- Understand there will always be another opportunity, the market will not magically disappear after the move you are missing out on. Wait patiently for the next opportunity.
- Trade with a systematic approach. By using a set-in-stone trading system, you are less likely to cave in to emotional trades, as they likely will not fit in with your rules.
- Get experience. Sounds easy enough, but you will get better at managing your emotions as you get more trades under your belt.
- Journal your trades. It forces you to write down your reasoning for the trade, which will often help you identify FOMO trades quickly. It will also show you the performance of previous FOMO trades, as a reminder of why you should not listen to your emotions. A journal will also give you the confidence to follow your system, as you know exactly how it works, and where it works well.
- Step away from the charts when you are feeling FOMO. The more you watch the chart go up, the worse the feeling will become. This is easily prevented by turning off your screen and going outside.
- Recognize that you’re not the only one feeling it. Many others will feel FOMO too, and may cave in. The more people do, the more dangerous it becomes. Being aware of this may help you decide not to buy in.
All in all, dealing with FOMO is a continuous challenge. Having a systematic approach and sticking to it will help you take better trades. Stick to your plans, and don’t let irrelevant factors make you deviate from it.
Good luck!
Disclaimer: This article is based on my limited knowledge and experience. It has been written for educational purposes. It should not be construed as advice in any shape or form.
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