Despite being well-known enemies when making trading and investment decisions, FUD and FOMO keeps making plenty of victims.

I've been prey to both of them more than once over time.

What I say below is mainly based on experience, but it's not an investment advice, since I'm not qualified to give you one.

Bellow I'll refer to "assets", although it can apply to various financial instruments, commodities, currencies or cryptocurrencies.

What are FUD and FOMO?

The acronyms say quite clearly what they stand for, so let's expand.

FUD = [F]ear, [U]ncertainty, [D]oubt

FUD installs when you fear that your investments will lose value, and you are uncertain and doubtful about the future of the assets you've invested in.

FOMO = [F]ear [O]f [M]issing [O]ut

When the price of the asset you have your eyes on moves rapidly in a direction (usually when it soars), if you haven't bought that asset yet, you might FOMO.

Both FUD and FOMO can be induced to masses of people, through the spread of ideas and emotions, which sometimes is done purposely for the intent to manipulate.

Both FUD and FOMO are bad because decision are made based mainly on emotions, and to a very small extent on logic.

Don't get me wrong, ALL DECISIONS are taken emotionally, but to make them "right", they need a rational justification. And when you submit to FUD or FOMO, you don't have the latter.

Using simple strategies to avoid FUD and FOMO

There is no one completely immune to FUD or FOMO! Those who go through them seemingly untouched, have rules and limits they don't cross, no matter what.

And even better, they don't rely on enforcing these rules and limits themselves when the time comes, they set them out in advance and leave the process in the hands of a merciless software.

Let's go over some strategies to avoid FUD and FOMO.

1. Hold on to your asset

This is the simplest strategy you can use to discard FUD and FOMO.

It's mostly useful when the asset's price has a tendency to appreciate on the long term (3 years at least, better 5 years minimum). You can also use it if you think the asset is fundamentally undervalued, but you'd need to know what you're doing.

This strategy requires you to be strong and not sell when or if the asset goes through a price crash on a short / medium term.

It can also be combined with the following strategy.

2. Hold on to your asset and gradually take profits out

This is the same strategy as above, but with a small difference.

No price goes only up. So, the smart thing to do is to take some of the profit out, as the price of the asset soars.

You set a "take profit" price or a profit margin, and when you hit it, you sell. Some platforms allow you to do this automatically, which prevents you from wishfully think the price will keep rising, and, instead of selling, you'll stay some more time for a bigger potential profit, which can evaporate, if instead the price goes down.

The funds you took out you can use any way you want, including to buy at lower prices, if it ever goes down again. Don't ever regret slowly taking the profits out, even if the asset's price keeps going up! Until the asset is sold, the profit is virtual.

What happens if you are in loss? The strategy says keep holding until you are in profit, to make things simple.

Both the strategies above should make the decisions simple for you so you won't be affects by either FUD or FOMO, on the long-term.

Holding and spikes

If you buy your way in on a spike based on FOMO (for example in December for bitcoin), holding onto your asset can be a real challenge. In fact, in this particular case, it can be much more profitable to sell at a loss immediately after you realized it's a spike, and buy when the downtrend is over. But not everyone can clearly identify these elements, and both FOMO and FUD will play tricks on you the entire way.

Buying or selling decision, and avoiding or making use of FUD and FOMO

The reason behind your decision is important. First, are you trading or investing? Because there are different correct triggers for buying or selling.

While for trading, short and medium term price movements and technical analysis play an important role, investment decisions should be made mainly on fundamental analysis and are generally thought out for years.

Trading is more volatile, more influenced by the emotions in the market, investment is more about finding intrinsic value in underpriced assets.

A buy decision should not be taken lightly when you're hyper-enthusiastic (FOMO), without stepping back and doing something else to calm down, and then analyzing logically if the asset price is justified at the time you want to buy. Even if it "feels" not right, but you can't find a reason for it, it's better to stay away for a while and see what happens.

In many cases, when you go into the FOMO state, it's a good signal you can start to take out profits, but try to find another way to support the same conclusion.

Same goes for a sell decision in a FUD state. Don't sell unless you have reached your "stop loss" target (that's what traders, and investors who don't use the "holding strategy" set up to avoid losing more than a certain amount or percent on a single asset)! You may in fact want to buy when you feel the FUD and you find other reasons to concur to the same conclusion.

Conclusion

When you have a strategy, rules and limits you invest and trade by, it is less likely FUD and FOMO will have an important effect on your decisions. But for that, most of the times we have to set those rules and limits outside of our direct control, because we are not reliable to act as planned, under intense emotional pressure.