Having to deal with FOMO – or fear of missing out as it is popularly called – is a particular skill to be adopted by traders and investors. The fear of missing out does hurt your emotions. It can also overshadow your judgment as much as it clouds your trading logic. This may be more problematic for you whenever choice making becomes paramount.
Traders and investors who have a solid understanding of FOMO, where it originates from, and how they can equally respond to it are advantaged to face the fear of missing out. This guide will tighten your grips on dealing well with your fear of missing out by providing you with lasting solutions to stop FOMO right in its tracks.
Major talk points
What is FOMO in forex trading?
To answer the question, FOMO is a situation whereby traders are fearful of missing out on tremendous and pleasant opportunities in the market. This fear may extend to nervous traders thinking that other traders will be more successful than they are.
The fear of missing out on trading opportunities may lead a trader to enter into a trade without having a solid understanding or thoughts on his action. Another possible effect of FOMO is closing trading targets too early due to the activity of other traders in the market. After going through this guide, you should have developed a strong sense of trading confidently without fearing missing out.
The characteristics of a FOMO trader
A trader with a fear of missing out can probably be spotted from miles away. It’s the enemy of every trader, potentially causing you to lose more than was necessary. If someone is a FOMO, you will probably see the following characteristics:
FOMO traders are greedy about their earnings. To minimize their losses, they want everything, and they want it right at this moment.
FOMO traders don’t have the patience to wait for the perfect setup for a trade. As a result, they will sell very fast, fearing that the profit will disappear. They will also impulsively enter trades without researching, afraid that “such a good price” will go away.
3. No trading strategy
FOMO traders don’t usually have a trading strategy. Very often, they will enter a trade and just “wing it.” They will use their emotions mixed with a herd mentality to make a trade.
4. Lack of confidence
Many traders who fear losing will not have the confidence to enter a trade and stick to it. They will also try to win more trades after losing. As a result, they get into random trades, setting themselves up for loss even more.
The factors that can trigger FOMO
FOMO trading may be characterized by emotion, by there are also certain things that trigger it. This can include:
· Market volatility: When the prices keep swinging in different directions, the trader may be tempted to make a move.
· Losing streaks: Many losing streaks in a row can make a trader too afraid to make a move, or even take an impulsive decision to recover the losses.
· News: Certain events may cause a trader to enter or exit a trade impulsively, out of fear of missing out.
· Social media: There are many professional traders on social media forums. Seeing them on winning streaks may cause a FOMO trader to feel like they are missing out.
Controlling these triggers is very important if you identify as a FOMO trader.
Why you should avoid FOMO in trading
As mentioned, FOMO behavior is your number one enemy in trading. Here are the main reasons why you should avoid it:
· Difficulty in setting stop-loss
As a FOMO, you’re only in to win. What you don’t realize is that prices can go down before they go back up. You’ll set a small stop-loss, which can get you out of a trade before you even make a profit.
· Potential great losses
As a FOMO trader, you may either get in and out of a trade impulsively, or you may not enter/exit them early enough. This can cause potential losses, especially if you don’t have a stop-loss order set.
Tips for controlling your FOMO in trading
It can be very difficult to control the FOMO you have brewing inside of you. However, there are several things that you can do. Here are a few tips you’ll want to follow:
· Always keep a trading plan and strategy. It will prevent you from acting rashly.
· Have a good grip on the market in which you’re trading.
· Don’t act like a lost trade will be the end of the world. The market is big; there will always be more trades.
· Don’t use more money than you can afford to lose in a trade. This will prevent major losses.
· Write your trades in a trading journal. This way, you can use the information for future reference.
· Always verbalize the reasons for entering a trade before you do it.
It may take some time, but eventually, you should be able to control the FOMO in you.
What is the root of FOMO in trading?
An average trader or investor spends more time in an immersive online social community. They are being bombarded with various stories of traders making a substantial income from taking a confident decision. This series of impulsive actions could stem right from the interconnection of one’s life. Fear of missing out has its root deep in the emotion of traders involved.
FOMO is also deeply rooted in emotions that could occur during a trade. Feelings of greed, fear, impatience, and jealousy are the primary culprit behind this situation. In addition, due to the lightning-fast nature of the foreign exchange market, rapid market movement or discussion with another trader could provoke the fear of missing out.
Ways to deal with FOMO
There are several ways to effectively deal with the fear of missing out on more significant opportunities as a trader. We have compiled a list of ideas and tips to help you remain focused on your set trading goal without bailing out under pressure.
Rather than bother yourself about what other traders are doing, do any of the following;
- Derive joy in trading
You may not be able to take your eyes off the distractions out there if you cannot personally enjoy trading. You’re likely to handle FOMO better when you’re happy with your trading pattern. To get a better grip on trading the market stock, you can start with a demo account on any chosen online trading platform until you can rely on your judgements about the market situation, regardless of what others are saying.
- Plan long-term profit
One of the ways to properly deal with the fear of missing out is to trade with long-term profit in view. Your mind will naturally want to focus on the downside of taking actions like this, but you must be determined to establish your ground if you’re in for disciplined trading. Do not be scared of loss. Losing part or all of your capital may occur, but strategic investors understand that risk.
- Have a trading routine
When you establish a routine as a trader, this will help you eliminate the possible isolating nature of trading (which makes FOMO easily creep in). A trading routine gives you ample time to weigh the market options and settle on the decision that favours you before entering any trade without being distracted by what other traders are doing. Find what time and trading style works best for you and remain focused on it.
- Craft a unique plan
There are no two ways about it: you need to develop a trading plan to deal with FOMO. Without a plan set in place, trading could put you at a higher risk of losing your invested capital. It is straightforward for you to assume that a situation is best to enter trade while the case may be otherwise. A training plan takes away all the assumptions and caters for every eventuality.
It is natural for a trader to have FOMO. What matters is how well you handle the situation by not allowing it have a more significant part of you. Whenever the fear of missing out kicks in through whatever means, make sure you refer to the ideas presented in this guide to deal with it.