What is FOMO? - The psychology of trading.
A lot of people have heard this term, but few people know what it really is and how it can be kept under control. FOMO is one of the most destructive phenomena on Crypto Market and other capital markets. Our portfolio can easily get lost if we are caught by FOMO. Everybody has gone through FOMO at least a few times. When we are aware that we are dominated by this feeling, we have taken the first step towards healing or keeping it under control.
FOMO is "fear of missing out". How do we recognize FOMO? It's that intense feeling that involves us when we see that a currency grows strong, and we do not have that currency in our portfolio. The root of FOMO is greed. Immediately we have a feeling of fever that is known as "fear of missing out". In short, we want to have that currency in order to make money from it. We want our share of that win! And without objectively analyzing that currency, we will buy it immediately.
A hasty decision, based on a destructive feeling. Well, this is the danger. Often FOMO puts us in the position of buying a coin too expensive. Under the influence of FOMO we can buy a coin that is close to a top. A few hours or a day after we bought it, we find that the price of the coin collapses and we are at a loss.
Any currency must be purchased taking into account two factors: fundamental analysis and technical analysis. If you feel a FOMO impulse, look after a daily chart of that currency. Look for the minimum and maximum points of the coin. Did the currency rise by several hundred percent in the last few days? Then it's time to stay away. Do not buy.
It is true that the currency may increase and may create a discomfort. It's better to be safe than to buy on top.
And yet, if you did not resist FOMO and did not analyze the historical price evolution, how do you protect yourself? If you bought and see that the coin shows signs of fatigue, or even started a violent correction, you have two solutions.
Both solutions involve selling the respective currency with zero profit, or even a small loss.
This will protect your portfolio from a greater loss in the future if the currency decreases a lot. The maximum loss you may have ranges between 5-10%. A loss of 5-10% is easy to recover on the Crypto Market. It is preferable not to get into this situation, so the best solution is to place stop loss on shifts. However, in some situations when the market is very volatile, stop loss may not be executed. In conclusion, it is advisable to close with manual order.
So, if you find yourself making the mistake and buying on FOMO, you oversee the price of that currency and, if you need it, sell it with a small loss if it is not possible.
Still, can we ever say we've been cured by FOMO? Yes, no doubt! The more trader's experience increases, the more FOMO is under control. Easy, easy FOMO will disappear. His place will be taken by rational thinking, analytics. Succes in trading!
@mihaisyblu,
In the legacy markets - NASDAQ, NYSE, AMEX, CBOE, etc., it was phrased as "Don't miss this train."
Meaning: Buy Now or Be Sorry.
It's the same type of fear/greed marketing used today in the cryptocurrency markets; usually for PND (Pump and Dump) sh*tcoin ICO's.
For example: "Announcing the Next Bitcoin: SUCKERCOIN. Don't miss out on this chance to be an early adopter!"
Upvoted and following you now.
Namaste,
JaiChai
Yes you are right. I also know these terms from the old capital markets. I'm old fox on capital markets ;-) And I'm following you.
So, meanwhile: somewhere else there is something very unspectacular to nearly anybody, and to most people unknown, that is the really great buy now. Judged from ten years from now.
Lol, "repeat until broke".
So true, every trader has been through this.
I've long since learned my lesson.
I won't even buy fairly priced assets. Unless it's on 🔥 sale prices I'm not interested. I'll let the next guy have it.
Yes! Important lessons that each trader has to pass. It is part of the learning process of trading.
That is interesting, but the thing is that phenomenon is merely an illusion as the cryptomarket is almost always BULLISH (at least in the long term), so as long as you take ACTION you will most likely have some gains.
I would say you are right, in part. Indeed, Crypto Market is a bull market in this period. And this is especially due to King Bitcoin. :-)
I learned during the trading years that it is not good to leave the guard down the capital markets. A bull market that goes up for years becomes more and more dangerous. Now that we are referring to the Top 10 Crypto market (market cap) coins even if it was wrongly bought near a top if we have enough patience we will come to a profit moment. But that involves a lot of stress ... I give you an example of ETH. Who bought in June area 350-400 usd had to wait almost 6 months to enter the profit. ETH exceeded 400USD at the end of November. In six months, they could make nice money on other coins. What I'm saying is that the losses can be recovered here. Bitcoin, a mis-purchase under the influence of FOMO, would have been quick to profit.
Otherwise the situation is with a lot of other coins. There's a FOMO purchase that can mean a disaster for the portfolio. There we have no guarantee that the whales will return to raise prices after a 50-75% drop. There are many examples of this kind. The most well-known is Doge. There are many prisoners in Doge who may never recover their losses. Doge probably will never reach the previous maxims. Or it could get there, but it would take years. I read various stories on these topics, on various forums.
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