How to minimize FOMO and trade more clinically
article by CryptoJelleNL
Whether you are just getting into trading or have years of experience under your belt; chances are you run into FOMO every now and then. Even the greatest traders and investors struggle with those emotions from time to time. In today’s article, we dive into FOMO and discuss a few approaches to reduce its grip on our decision-making.
While FOMO is a challenge not unique to trading, financial markets are notorious for inducing FOMO. To make things worse, crypto markets run 24 hours a day, any day of the year – causing us to miss out on hours of price action every night.
As a result, experiencing FOMO (the Fear Of Missing Out) is inevitable. After all, it’s only natural to worry when the market goes on a violent move against you. There are varying degrees of FOMO. For some traders, not being in a trade can already trigger FOMO-esque feelings, whereas others will only run into the challenge when Bitcoin rallies for over 50% without them.
Usually, these FOMO-induced feelings and emotions are exacerbated by social media. The constant stream of PnL cards, trade setups, and news can make you feel like everyone is making money, and you are the only one that isn’t.
In my experience, beginner traders all make the same mistake sooner than later, FOMO-buying into a strongly overbought token, only to be left holding a token bought at a massively inflated valuation. Still, even the most experienced traders run into FOMO from time to time. Even the most legendary hedge fund managers will feel uneasy when a stock rallies strongly while their fund has no exposure.
In essence, everyone faces the same emotions – but it is how you deal with them that determines whether it will cost you money. The mere experience of FOMO is not enough to cause financial ruin. It is only when you let FOMO-fuelled emotions cloud your judgment that problems start to arise.
But that’s easier said than done.
How to minimize FOMO?
Enough about what FOMO is, let’s dive into how we can deal with it. Let’s clear up one thing, you can’t get rid of FOMO. It will plague you until the end of time, but there are ways to use it, rather than let it use you.
The first thing to burn into your brain is that there will always be another opportunity. It sounds so obvious, but when those FOMO feelings creep around the corner, many traders suddenly throw this knowledge out of the window. Get yourself a sticky note, write this down, and stick it to your monitor. Trust me, the reminder will likely save you money.
Another powerful reminder – you might want to grab that sticky note again for some more notes – is that you’ll not be the only one feeling these emotions. Many others will feel FOMO towards that same chart, and many of them will cave in. Being aware of this may help you decide not to buy in.
Journaling your trades is another great way to mitigate the effects of FOMO. Firstly, a journal forces you to write down the reasoning for your trade, which may help you identify that this trade perhaps isn’t as wise as your brain made it out to be. It will also show you the reality of previous FOMO-induced trades, which likely was not very successful – just to remind you of the quality of this trade idea.
A trading journal will also give you the confidence you need to follow your trading system – a system you should be following religiously. By following a trading system with well-defined rules and parameters, you are less likely to cave into emotionally driven trades. Again, a journal will help you stick to these rules and parameters, as you can see exactly how your trading system performs, and where it performs well.
Nevertheless, the best way to minimize the effects of FOMO is by getting experience. The more mistakes you make, the better you will be at managing the emotions. Consider those costly mistakes as your tuition for the school of markets.
If all of this doesn’t work – it’s time to step away from the screens. The more you watch prices go up, the worse the feelings will become. Close the computer, delete all your trading and charting apps from your phone, and go outside. If you don’t have access to your account, you can’t make FOMO-fuelled trading mistakes.
And when you do enter trades out of FOMO, be sure to do it with a stop-loss in place. The last thing you need is to blow up your account by getting liquidated.
Closing Thoughts
Before we go, let’s reiterate how it is normal to experience FOMO and the emotions associated with it. Even the best traders and investors experience those same feelings. With time, you too will learn to recognize these emotions for what they are. You will get better at managing those emotions.
The more mistakes you make, the more you train your brain. Eventually, you’ll have enough scar tissue to make sure you don’t make FOMO-fuelled mistakes again. This too can pose a problem, but that’s a topic for another article.
Author's Disclaimer: This article is based on my limited knowledge and experience. It has been written for informational purposes only. It should not be construed as investment advice in any shape or form.
Editor's note: CryptoJelleNL provides insights into the cryptocurrency industry. He has been actively participating in financial markets for over 5 years, primarily focusing on long-term investments in both the stock market and crypto. While he watches the returns of those investments roll in, he writes articles for multiple platforms. From now on, he will be contributing his insights for WOO Network as well.
Check out his twitter: twitter.com/cryptojellenl
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