Fear of missing out, FOMO, is a fact of life, and understanding its concept is essential for all investors and traders. However, while learning the positive and negative effects associated with the fear of missing out, it is also necessary to know how to overcome FOMO in trading to avoid falling victim.
Dealing with the fear of missing out is a valuable skill every trader should possess. FOMO has a negative emotional impact on traders, clouds judgment, and overshadows logic, which is usually a problem when making trading decisions.
Are you struggling with FOMO and have been trying to overcome it? Then, this article is for you! In this article, I will walk you through FOMO in trading, its triggers, and expert-proven ways to help you overcome the fear of missing out.
Let’s dive right into it!
First, What is FOMO in Trading?
As stated above, FOMO describes the irrational fear of missing out. It is an emotion that causes traders to overreact to any information that might indicate opportunities. Unfortunately, although all traders feel FOMO, the ones that disproportionately suffer from it are those that give in to their urges and struggle to resist acting.
Such traders are yet to understand how to react to the emotion and be okay with feeling FOMO, regardless of the future outcome. However, traders who understand FOMO, its origin, and how to react are in a strong position to tackle its root cause.
Top 4 Factors that Trigger FOMO
Understanding the factors triggering the fear of missing out is another significant step to help you overcome FOMO in trading. Here are a few reasons you may become scared of missing out on trading opportunities:
- Market Volatility.
- Social Media Financial Platforms.
- Repetitive Losses.
- Multiple Wins.
Benefits of FOMO in Trading
Although the downsides of FOMO are usually more significant than the benefits, FOMO still offers some good opportunities for a trader.
One of the undeniable benefits of FOMO in trading is that the sentiment iterated among the feeling of FOMO on a trending asset is more likely to cause a pretty acceleration in asset price, hence giving traders more opportunities of making profits. Also, FOMO encourages investment in new coins and is a good guideline for (crypto) traders.
Downsides of FOMO in Trading
Trading spurred by FOMO usually doesn’t result in a positive Return On Investment (ROI). This is because FOMO in trading often contradicts the primary investment rule of buying low and selling high.
Also, FOMO trades are risky because investors buy at a potentially inflated price point and are often executed on overhyped investments.
How to Overcome FOMO in Trading: Top 5 Ways
1. Stick to a Trading Strategy/Routine
You need a trading plan to achieve consistent trading results as a trader. A correct and objective trading plan helps traders manage their emotions well, including the fear of missing out.
All traders must have an approach based on their trading philosophy, financial plans, tolerable risks, etc. Such a strategy puts a trader in an excellent position to avoid FOMO.
2. Know Your Reasons for Trading
The rationalization that underpins every FOMO trade occurs internally, as traders usually make excuses for ignoring analysis and following the herd. Verbalizing your reasons forces you to evaluate what you genuinely know about trade and makes it clear if you have a solid basis for trade or are making excuses.
3. Use Indicators Wisely
Accept that the market knows more than you. Understand the context of a trade before entering when your strategy suggests there is a good entry. Indicators are helpful – several successful traders implement them in their trading strategies. However, ensure you use them wisely.
Do not deface your charts under the guise of using indicators to identify a sniper entry point. Most likely, it will only make you always be in a state of panic. For me, the neater the chart, the sharper your vision of the market will be.
4. Take Online Trading Courses
Trading courses are essential for anyone serious about learning how to trade. As a trader, learning never ends.
You can learn a time-based trading and risk management strategy that helps you overcome FOMO in trading in the best possible way. Instead of waiting for the markets to teach you an expensive lesson, consider allowing a better professional to walk you through the ropes of overcoming FOMO. Doing this increases your chances of overcoming FOMO and being successful.
Are you unsure of the best online trading course to register for? Check out Trade With Mac economy to book a one-on-one forex trading class with Coach Abiola today.
5. Communicate with Professional Traders
Lastly, always communicate with professional traders. In other words, have a trading mentor and belong to a trading community.
Although some traders prefer to learn by self-taught, having a mentor never hurts. A mentor can guide the learning process and evaluate various advice about trading, including strategy, trading psychology, and money management.
Conclusion on How To Overcome FOMO In Trading
FOMO can significantly impact your trading decisions if you allow it. However, understanding what it is and how to avoid it helps to minimize its effects on your trades. As you know, trading is an art based on probabilities and data, and you tend to underperform when you act on negative emotional stimuli.
Hopefully, this article has helped you understand everything you need to know about the fear of missing out, its triggers, benefits, downsides, and, more importantly, the best tips for overcoming FOMO. Do you have other questions or thoughts? Kindly leave them in the comment section below!
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