Trading Psychology – FOMOJS-Masterclass – FOMO (Fear of Missing Out)
Definition
FOMO – Fear of Missing Out - is a relatively recent addition to the English language, but one that is intrinsic to our day-to-day lives. A true phenomenon that affects many traders and can be a major hurdle to become a successful trader.
For instance, the feeling of missing out could lead to the entering of trades without enough thought, or to closing trades at inopportune moments because it’s what others seem to be doing. It can even cause traders to risk too much capital due to a lack of research, or the need to follow the herd. For some, the sense of FOMO created by seeing others succeed is only heightened by fast-paced markets and volatility; it feels like there is a lot to miss out on.
To help traders better understand the concept of FOMO in trading and why it happens, this tutorial will identify potential triggers and how they can affect a day trader’s success
WHAT IS FOMO IN TRADING?
FOMO in trading is the Fear of Missing Out on a big opportunity in the markets and is a common issue many traders will experience during their careers. FOMO can affect everyone, from new traders with retail accounts through to professional and institutional traders.
In the modern age of social media, which gives us unprecedented access to the lives of others, FOMO is a common phenomenon. It stems from the feeling that other traders are more successful, and it can cause overly high expectations, a lack of long-term perspective, overconfidence/too little confidence and an unwillingness to wait.
Emotions are often a key driving force behind FOMO which can lead traders to neglect trading plans and disrespect their trading strategy.
Common emotions in trading that can feed into FOMO include Greed, Fear, Excitement, Jealousy, Impatience and Anxiety
CHARACTERISTICS OF A FOMO TRADER
Traders who act on FOMO will likely share similar traits and be driven by a particular set of assumptions. Below is a list of the top things that guide a FOMO traders’ behavior:
1. Listen too much to the news. ‘They are all doing it so it must be a good idea’.
2. Be too much focused on potential profits versus thinking risk first.
3. Not sure but just let’s give it a go.
4. Getting frustrated in hindsight: ‘OMG, I should have seen this coming’.
5. This will be a great opportunity and if I do too much analysis, I will miss this great opportunity.
What factors contribute to FOMO trading?
FOMO is an internal feeling, but one that can be caused by a range of situations. Some of the external factors that could lead to a trader experiencing FOMO are:
• Volatile markets. FOMO isn’t limited to bullish markets where people want to hop on a trend – it can creep into our psyche when there is market movement in any direction. No trader wants to miss out on a good opportunity
• Big winning streaks. Buoyed up by recent wins, it is easy to spot new opportunities and get caught up in them. And it’s fine, because everyone else is doing it, right? Unfortunately, winning streaks don’t last forever
• Repetitive losses. Traders can end up in a vicious cycle: entering a position, getting scared, closing out, then re-entering another trade as anxiety and disappointment arise about not holding out. This can eventually lead to bigger losses
• News and rumours. Hearing a rumour circulating can heighten the feeling of being left out –traders might feel like they’re out of the loop
• Social media. The mix of social media and trading can be toxic when it looks like everyone is winning trades. It’s important not to take social media content at face value, and to take the time to research influencers and evaluate posts.
Fomo
Overcome Fear of Missing Out 🤮MAIN TALKING POINTS:
What is FOMO in trading?
What characterises a FOMO Trader?
Factors that can Trigger FOMO
DailyFX analysts share their FOMO experiences
Tips to overcome FOMO
WHAT IS FOMO IN TRADING?
FOMO in trading is the Fear of Missing Out on a big opportunity in the markets and is a common issue many traders will experience during their careers. FOMO can affect everyone, from new traders with retail accounts through to professional forex traders.
In the modern age of social media, which gives us unprecedented access to the lives of others, FOMO is a common phenomenon. It stems from the feeling that other traders are more successful, and it can cause overly high expectations, a lack of long-term perspective, overconfidence/too little confidence and an unwillingness to wait.
Emotions are often a key driving force behind FOMO. If left unchecked, they can lead traders to neglect trading plans and exceed comfortable levels of risk.
Common emotions in trading that can feed into FOMO include:
Greed
Fear
Excitement
Jealousy
Impatience
Anxiety
WHAT CHARACTERIZES A FOMO TRADER?
Traders who act on FOMO will likely share similar traits and be driven by a particular set of assumptions.
WHAT FACTORS CAN TRIGGER FOMO TRADING?
FOMO is an internal feeling, but one that can be caused by a range of situations. Some of the external factors that could lead to a trader experiencing FOMO are:
Volatile markets. FOMO isn’t limited to bullish markets where people want to hop on a trend – it can creep into our psyche when there is market movement in any direction. No trader wants to miss out on a good opportunity
Big winning streaks. Buoyed up by recent wins, it is easy to spot new opportunities and get caught up in them. And it’s fine, because everyone else is doing it, right? Unfortunately, winning streaks don’t last forever
Repetitive losses. Traders can end up in a vicious cycle: entering a position, getting scared, closing out, then re-entering another trade as anxiety and disappointment arise about not holding out. This can eventually lead to bigger losses
News and rumours. Hearing a rumour circulating can heighten the feeling of being left out –traders might feel like they’re out of the loop
Social media, especially financial Twitter (#FinTwit). The mix of social media and trading can be toxic when it looks like everyone is winning trades. It’s important not to take social media content at face value, and to take the time to research influencers and evaluate posts. We recommend using the FinTwit hashtag for inspiration, not as a definitive planning tool.
As well as affecting traders on an individual level, FOMO can have a direct bearing upon the markets. Moving markets might be emotionally driven – traders look for opportunities and seek out entry points as they perceive a new trend to be forming.
DAILYFX ANALYSTS SHARE THEIR FOMO EXPERIENCES
Traders of all levels of experience have dealt with FOMO, including our DailyFX analysts:
“Trade according to your strategy, not your feelings” – Peter Hanks, Junior Analyst
“Strategize. Execute. Stick to the plan and don’t be greedy. All types of traders make money; pigs get slaughtered” – Christopher Vecchio, Senior Strategist
“Trade decisions are not binary, long vs. short. Sometimes doing nothing is the best trade you can make” - IIya Spivak, Senior Currency Strategist
“If you don’t deal with and temper FOMO in trading – it will deal with you” – James Stanley, Technical Strategist
“No one trade should make or break you. With that said, if you miss an opportunity there is always another one around the corner” – Paul Robinson, Currency Strategist
TIPS TO OVERCOME FOMO
Overcoming FOMO begins with greater self-awareness, and understanding the importance of discipline and risk management in trading. While there is no simple solution to preventing emotions from impacting trades and stopping FOMO in its tracks, there are various techniques that can help traders make informed decisions and trade more effectively.
Here are some tips and reminders to help manage the fear factor:
There will always be another trade. Trading opportunities are like buses – another one will always come along. This might not be immediate, but the right opportunities are worth the wait.
Everyone is in the same position. Recognising this is a breakthrough moment for many traders, making the FOMO less intense. Join a DailyFX webinar and share experiences with other traders – this can be a useful first step in understanding and improving trading psychology.
Stick to a trading plan. Every trader should know their strategy, create a trading plan, then stick to it. This is the way to achieve long-term success
Taking the emotion out of trading is key. Learn to put emotions aside – a trading plan will help with this, improving trading confidence.
Traders should only ever use capital they can afford to lose. They can also use a stop to minimise losses if the market moves unexpectedly.
Knowing the markets is essential. Traders should conduct their own analysis and use this to inform trades, taking all information on board to be aware of every possible outcome.
FOMO isn’t easily forgotten, but it can be controlled. The right strategies and approaches ensure traders can rise above FOMO.
Keeping a trading journal helps with planning. It’s no coincidence that the most successful traders use a journal, drawing on personal experience to help them plan.
Overcoming FOMO doesn’t happen overnight; it’s an ongoing process. This article has provided a good starting point, highlighting the importance of trading psychology and managing emotions to prevent FOMO from affecting decisions when placing a trade.
TURN YOUR FOMO INTO JOMO
Now you know how to spot and stop FOMO in its tracks, find out how to embrace JOMO in trading and change your mindset for greater success.
Source: DailyFX
ETH don't let the emotions blind youETH had a bullish strong movement that broke the range but here is the problem ETH is in a very important resistance since july and after was a support but the important is we can't trust is this movements because aren't natural even more in a bear market so be careful with eth .
if someone is gonna open a short trade don't use more than 5X because the volatility is very high and the stop loss has to be very generous
What is FOMO and how we can minimise itI like to try keep explanations nice, simple and short.. everyone one should know the definition of FOMO is (fear of missing out) this is a simple and common emotion that affects us in all different areas of our life but when you bring it to the charts and your trading it can lead to a roller coaster of emotions and mistakes...
I found a few things that help me when learning and still controlling it is... Been cautious with who you follow and monitor how your desertions are influenced from others, (hot tips, signals etc) you always want to have a clear view of how you yourself analyse the markets with a strict plan.. you may be a quick intra-day trader but someone you follow gives a signal that might be a trade to hold for weeks... a mix up in trading styles can cost you a loss even though the person you follow makes the right call.
This kind of backs off the last suggestion I made but its simple Create a plan, Know which time frame your trading in (short term long term) and trade only if its right by YOUR trading plan.
Overconfidence can lead to trying to stay to active on the charts, chasing every possible trade setup and can really mess with your head. Chasing a loss after losing money is another common mistake.. sometimes i take a day or 2 away from the market if I have had a nice winning trade as well as possibly taking a loss. Sometimes its best to take a breather access what you may have done right or wrong and come back with a clear head ready to make smart decisions
One of my personal favourite strategy's to limit this situation is, If you want to enter the market but price may not be at the area you think it may support or resist from, take 50% of the usual amount you risk for example you usually risk 1% which may be $100 make it 0.5% which is $50 and then if price goes the way you expect your still entered in a position but then if price goes the opposite way and hits the level you expect then you can enter the other 0.5% of risk to get into another trade a maybe a better entry point...
DONT rush into trades on the Monday!! Remember there is a whole week for many opportunity's to arise and sometimes the best opportunity's don't come until the end of the week, I used to over trade on the Monday and end up trying to catch up the rest of the week... So I for a while didn't even look at the charts on the Monday to resist the temptation.
Different strategy's will work for different people so find something that works for you and stick to it!! Let me know if you can share any ideas that helped you, it may be able to help someone else!!
MARKET THOUGHTS 10/14/22Grab a cup of coffee, wake up and read up lol
** (Not a Financial Advice, just sharing my own opinion and the process I do in the morning before I make a decision to trade.) **
As you guys are all aware the SPY went nuts yesterday, anything is possible in the market these days lol. Once the shorts got squeezed above 354 and FOMO kicked in it ran like it stole something :rofl: .
Now as you get ready for todays play here are things you should consider based on the charts and technical analysis:
- SPY, yesterday, just showed a possible sign of short term reversal from the divergence we've been talking about in the stream the whole week.
- The bounce was larger than expected and larger than usual, when a move like this happens one direction, there's a possible consolidation day the next day or pullback, unless volume continues and breaks above key levels continuing to squeeze the shorts and FOMO continues as well.
- If you are planning to go Gungho on going long, zoom out first and see the trendline on the daily and the pre-market action on SPY and where its at currently (See Chart Posted).
- Break of that trendline upwards can mean retest of the next resistance and probably even retest the next trendline up, but SPY has done its weekly range as of yesterdays candle, so slight chance it will continue breaking to the upside and do another big run. If anything, possible pump then pullback.
- The VIX on the weekly hit that trendline we talked about on the streams this week too causing the downward direction which usually does the opposite of the market, hence the run up yesterday.
** Scenario 1 ** VIX bounces above 9ema on the daily and stays above, market pullback.
** Scenario 2 ** VIX breaks below the 9ema on the daily, it will have about 1-2points max move today. Which can mean a pump in the market and will hit exhaustion, so pump and dump. (See VIX Chart Posted).
SPY
VIX
do NOT do this !a very obvious visual but necessary to share, I don't want any of you to fall into this madness of praying for a trade to work
this is a reminder to not fall into FOMO trading
to counter this, you need to remind yourself about the type of trades you are into, are you in an intraday swing, are you on a big swing that could take weeks or months to happen ?
then, lower your expectations and place a partial TP at 50% of your expectations
and then, move stop loss to stop gain
This will make a big difference in your PNL, in your trading perfomance
That's what proper trade management is
ERN don't let fomo blinds you this type of movements generally aren't predictable and always ends bad too many people buy because they are missing the opportunity and at the next day the same people see how the money that they put disappear .
lines traced by fibonacci : 1.618 / 2.618
FED rate hike will push the market to the upsideDuring a quantitative tightening interest rates act as a bullish sign in the stock market. So, a 75bps or 100 bps hike will push the stock price up. And then it creates a bull trap. That's when everything will go down to hell.
NAS +18% - big cup & handle bull FOMO, target 15510
May sellers FOMO in play once returning from holidays realising summer rally
massive CUP & HANDLE with target at 15510 - 0.786 FIB retrace - September rally
this C&H would finish major wave2 sometimes in early October with entry to massive wave3 selloff into next year
BTC/USDHi all,
Hash Rate leads Difficulty in identifying Bitcoin Miner Capitulation.
Hash Ribbons is close to a buy signal and is it would be wise to pay attention.
Usually this indicator has a high probability of success if we analyze the history of buy signals and price action after that.
Since it is a lagging indicator, I frequently take DCA into account before BUY signals.
What do you think about this strategy?
FRACTAL ANALYSIS. V SHAPE RECOVERY. 20% CHANCE. SEE DESCRIPTION.So, i have something to share with you. This is just my vision. JUST MY FANTASY. Let's speak about it now.
***WARNING*** YOU WILL BECOME A MOON BOY/GIRL, SO REMEMBER THAT IT IS ONLY 20% CHANCE.
I used fractal analysis (took a fractal from covid dump and V shape recovery that happened in 2020), to predict what can possibly happen. During Covid dump It was absolutely the same - unpredicted conditions on the markets and bad macro economic factors in general. During 2022 dip in Crypto people has been expecting the CRASH OF FINANCIAL SYSTEM, but in general we received 9.5% CPI rates and this is it. Same was with Covid dump. People has been expecting apocalypses, but economy recovered in 6 months and a lot of people who bought crypto during these dip became a millionaires just in one year (imagine ETH for $80).
According to this theory, i think, that even stock2flow model can be still correct. Just timeframes have been changed.
So lets speak about the cycle. I think, if we will see this option playing out, than overall bullish trend of 2021 was just a pre-bullrun. Real bullrun in this case should happen in 2023 when BTC will hit $300K+ price target. THE FOMO WILL BE ABSOLUTELY UNBEARABLE. And this will be the end of this cycle and we will see another bear market (apx. since september 2023 till september 2024) with an absolute bottom for 1BTC at $70k-80k.
And just enjoy how this fractal perfectly matches everything. So according to this model - we will see $60K+ for 1 BTC at the end of this year. And $300K+ for 1 BTC in the next 12 months. Crazy? yes. Possible? Yes. Will it happen? I would say yes with a 20% chance 😁
NZDJPY: Zoom Out 🔍Everyone is focusing on the lower time frames without noticing the higher monthly supply holding right above current price.
Be careful selling before this zone! We are seeing lots of indecision suggesting price may well want to travel up into the supply before any signs of reversals.
Bear this in mind when trading this pair.
Please let me know what you think in the comments 💬
Elrond (EGLD) Surged 24% Today as the Broader Crypto Market SlipToday, the cryptocurrency project Elrond saw a surprising double-digit surge of 24% in the price of its native coin EGLD. In contrast, the overall crypto category slipped 2% as investors processed through the Federal Reserve's decision yesterday to increase interest rates by 0.75% -- marking the largest single-day hike since 1994.
EGLD is often called eGold, which seems fitting today as its price across cryptocurrency exchanges jumped as high as $57.50 over the past 24 hours -- it has retraced a bit since then, however. It also had a whopping 85% pump in trading volume over the same timeframe as a mini-FOMO run that appears to be occurring around one of the few bright spots today within the crypto space.
At the time of writing, most other cryptos in the top-10 projects based on market value were trading down including Bitcoin, Ethereum, BNB, Cardano, and XRP. By comparison to those other blockchains, Elrond's website boasts that it's 1000 times faster than it used to be and able to process 15,000 smart contracts per second while providing settlement for each of those transactions in seconds for only fractions of a penny.
Bull Eater Bears!As I said, bitcoin does not have any strength to go up at this point. Even with the heavy volumes of bulls, bitcoin could not break its 22k resistance and collapsed and is expected to drop to 16k dollars! Do not trade with excitement. It will not spring with a green candle, leave the fomo aside and rest. Bitcoin has a dangerous pattern of continued decline that can cause heavy drop. This is a personal analysis and it is completely true and there are no lies or traps to stealing your money with market making. Take great care of your money, I suggest trading and not hodl
goodluck
FOMO - Analysis from a Trading PsychologistFOMO.
Fear of Missing Out.
I can feel FOMO’s omnipresence in the trading world right now. We have seen some large career changing moves in Commodities & Futures as of late. Extend the lookback time a few years and the Cryptocurrency universe is surely included.
I decided to turn to my favorite trading psychologists, Brett Steenbarger,PhD. Brett has been in the trading game since the late 1970’s and his Nov 21’ speech on Trading FOMO piqued my interest. Below is a summary of what I took away from it, and some preventative ailments attributed to Brett’s psychological evidence-based outcomes.
FOMO is a P&L Killer! At its core FOMO is a fear. The problem is not that we missed the trade, it’s that our brains perceive that missed trade as a threat to our future, our success, our reputation. When humans are afraid of something, or see a threat, it produces anxiety. This fear takes blood away from the part of the brain where higher level thinking takes place and sends it to the part that impulsive thinking lives. There WILL be poor decision making under the influence of anxiety. The key to solving this issue is to take the threat out of the situation.
Solutions:
Taking a break from the screen is healthy but it is not a long-term fix. Brett explains how to train in exposure therapy (His presentation explains this in greater depth.) Slow breathing and visualization are more adept at battling FOMO. If you can visualize a calming place or situation and pair it with that fear, daily practice and dedication will prevent blood flow to the impulse zone. Gradually, when FOMO comes around, you will experience feelings of safety. Combined with expanding your time of reference, understanding, and acknowledging FOMO will make those events look like potholes on a long highway.
Missing a trade is unfortunate, but will it end my career? No. Will buying at the top, and then being so irate that I add to a losing trade and forgo stop orders end my career? It might. Will I be thinking clearly on my next trade with a fresh mistake permeating my thoughts? No.
The best motivation to avoid FOMO is to develop emotional hate towards the negative consequences of it. In the fullness of time, the desire to avoid negative outcomes becomes self-reinforcing with repetition and therefore cements as an internal priority. This works across the board in other life scenarios as well.
Tapping into other motivations besides P&L is one that really hit home with me as well. Brett dives into the desire to learn and grow as a greater motivator than just P&L alone. This addition will create a dual purpose to each trade. You are diversifying your outcome! If you come away from a trade with a negative P&L, but with a positive learning experience, you are building your Learning Capital. With time under this premise, your Learning Capital will be indistinguishable from your monetary statement.
Instead of tying your value as a trader strictly to your P&L, tie your value to your consistency and risk management. The magnitude of your P&L is nothing without consistency. Risk management begets larger positions, lower drawdowns, and an overall better quality of work life.
A Day comes with myriad experiences. Create a diversified life with people and activities that fulfill you outside of trading and your trading will improve. Reminding yourself daily of this is important.
Tying all of this together is the practice of keeping a daily ABCD Journal.
A - Activating Event – What got you upset? - Missing the trade in this case.
B - Beliefs about the event – Little voice in your head – Why is this upsetting to you? “Other people are getting ahead of me, I’m not as good as they are”
C - Consequences from the event – How does negative thinking affect your subsequent trading? I’m so upset about missing the opportunity I go ahead and miss the next one!
Becoming proficient in ABC will allow you to recognize the triggering event in real time. You begin to identify the negative beliefs and become a pro at understanding the magnitude of the consequences. You can change the pattern of your behavior because the consequences are so front and center.
D - Disputation- You are talking back at that negative thinking. How would you talk to someone you care about who is in that situation? Mentoring a teammate that missed a big play involves constructively lifting them up and helping them learn from it with a comforting tone. You aren’t going to beat them up.
I welcome all feedback and am also here if you want to chat about a particular experience. Happy Trading!
-Paul Wankmueller, CMT
Blue Line Futures Director of Content & Education