FOMO is a phenomenon that can even effects the trading of professional and experienced traders!
FOMO is the acronym for the “fear of missing out”, which refers to the feeling of anxiety or uneasiness you get when other people are sharing in a positive or unique experience while you are missing out. The phenomenon has been magnified with the advent of social media which makes it easy for us to know what others are experiencing at every moment. But what does FOMO mean in trading?
In the financial trading world, FOMO refers to the fear that a trader or investor feels when missing out on a potentially lucrative investment or trading opportunity. A trader’s fear of missing out becomes greater the more the market continues to act in irrationally and rising significantly over a relatively short time.
What is FOMO in trading?
In trading, FOMO is a situation where a trader is afraid of missing out on a huge trading opportunity in the market. FOMO is a common issue in financial trading and can affect anyone — both new traders with retail trading accounts and professional traders working for big institutions can experience fear of missing out.
That feeling of missing out on a trade occurs when you notice a sharp rally in a stock or a crypto asset and feel like “I should be riding this move; I can’t let this opportunity pass me by.” In essence, the desire to join in on the price movement clouds your judgment, making it difficult for you to perform the necessary analysis of the stock before placing a trade.
Placing trades out of FOMO results from our natural tendency to believe that what is happening will continue into the recent future, which is a common cognitive bias. In the financial trading world, every moment in the market is unique and anything can happen at any time.
Trading out of FOMO shows that our overriding trading emotions greed and envy — we desire to gain the same profit those who are already in on the trade are gaining, without considering that the price movement may have run its course. Unfortunately, the FOMO feeling becomes greater the more the market continues to move in that direction. However, the farther the price moves, the more likely it will actually reverse or make a pullback. From experience, most trades placed out of FOMO often end up as losers, which could have been avoided with a little bit of discipline.
FOMO has become a very common phenomenon in today’s world where social media makes it easy to know what others are doing. In fact, there seems to be a form of herd mentality in FOMO, which, analysts believe, is driving the irrational market rallies in the post-pandemic era. Despite the effects of the Coronavirus pandemic, The crypto market or the U.S. stock market keeps churning out a string of record highs. It appears that social media is fueling mass FOMO, with investors on the sidelines jumping into the market in order not to miss out, thereby driving the markets further up.
>>>and the solution is:
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FOMO is the acronym for the “fear of missing out”, which refers to the feeling of anxiety or uneasiness you get when other people are sharing in a positive or unique experience while you are missing out. The phenomenon has been magnified with the advent of social media which makes it easy for us to know what others are experiencing at every moment. But what does FOMO mean in trading?
In the financial trading world, FOMO refers to the fear that a trader or investor feels when missing out on a potentially lucrative investment or trading opportunity. A trader’s fear of missing out becomes greater the more the market continues to act in irrationally and rising significantly over a relatively short time.
What is FOMO in trading?
In trading, FOMO is a situation where a trader is afraid of missing out on a huge trading opportunity in the market. FOMO is a common issue in financial trading and can affect anyone — both new traders with retail trading accounts and professional traders working for big institutions can experience fear of missing out.
That feeling of missing out on a trade occurs when you notice a sharp rally in a stock or a crypto asset and feel like “I should be riding this move; I can’t let this opportunity pass me by.” In essence, the desire to join in on the price movement clouds your judgment, making it difficult for you to perform the necessary analysis of the stock before placing a trade.
Placing trades out of FOMO results from our natural tendency to believe that what is happening will continue into the recent future, which is a common cognitive bias. In the financial trading world, every moment in the market is unique and anything can happen at any time.
Trading out of FOMO shows that our overriding trading emotions greed and envy — we desire to gain the same profit those who are already in on the trade are gaining, without considering that the price movement may have run its course. Unfortunately, the FOMO feeling becomes greater the more the market continues to move in that direction. However, the farther the price moves, the more likely it will actually reverse or make a pullback. From experience, most trades placed out of FOMO often end up as losers, which could have been avoided with a little bit of discipline.
FOMO has become a very common phenomenon in today’s world where social media makes it easy to know what others are doing. In fact, there seems to be a form of herd mentality in FOMO, which, analysts believe, is driving the irrational market rallies in the post-pandemic era. Despite the effects of the Coronavirus pandemic, The crypto market or the U.S. stock market keeps churning out a string of record highs. It appears that social media is fueling mass FOMO, with investors on the sidelines jumping into the market in order not to miss out, thereby driving the markets further up.
>>>and the solution is:
- First, Fomo can involve even the most experienced traders, so the first step to overcoming Fomo is to accept it. This acceptance can make you more comfortable. The idea that other traders are always more successful can lead to fear of losing. So we have to increase the dose of carelessness a bit!
- Second, quite intentionally, sometimes leave trading positions. This means that despite the fact that you are sure that you have to enter, or that you have already entered into a position in this situation, do not open that transaction voluntarily to see that nothing happens. No one is ahead of you. And this market is always full of opportunities and never ends.
- Third, accurate risk management is the most important step in moving away from FOMO. Even if you are involved in a fraudulent transaction for fear of losing, careful risk management can support you well so that you do not incur heavy costs in the event of a loss.
- Fourth, the trading plan here is very effective and useful. Write a checklist of all the requirements for entering the transaction and check all the requirements before entering, and do not enter the transaction even if 1 item is not checked.
- Fifth, take trading psychology seriously and read about it for at least 10 minutes every day. Do not forget that the root of many losses in the financial markets is in the mind of the trader.
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