FOMO — What is it and how to avoid it?

Share:

FOMO — or the Fear Of Missing Out — refers to the sensation of anxiety and fear that traders feel when they think they will miss a profitable trade. FOMO is the fear of not being included in an exciting activity in which the community we belong to is participating, whether it’s a college party, a camping trip where friends are going, and we’re not especially interested in it but we wouldn’t miss out, or simply the financial markets that we’re trading on.

The cryptocurrency market is full of digital assets that enjoy explosive growth daily, percentages that traditional hedge funds only dreamt of a couple of years ago. However, it’s essential for traders not to let themselves be led by emotions, research the project they’re investing into, and build invincible trading strategies that they will not abandon at the market’s first impulse.

Why do emotions lead traders?

It’s not rocket science: explicable or not, there are things that traders fear. Every human is fearful, without exception, of the thought of losing money, ending up with cash blocked for months or even years, or afraid of a never-ending Bear Market. Every trader shakes to the belief that “tomorrow crypto will disappear” and becomes too greedy when digital assets’ prices go incredibly high, wishing for even more profit. It’s simply how the human brain works. The difference between a successful and a failing trader is the management of these emotions.

How do emotions affect investments?

The most common emotions on the market are fear, greed, boredom, and frustration, and traders can make many mistakes if these emotions lead them. For example, the fear of losing makes traders postpone certain transactions and miss the opportunity to gain potential profits. On the other hand, greed determines traders to refuse to exit a position and miss on realized profit because they feel too optimistic and think that the market will grow endlessly — and most of the time, these profits get back to zero or transform into a loss.

Each trader has to always keep in mind that sudden changes in the cryptocurrency market are regular, so it’s essential to keep an equilibrium of their emotions. Each trading position must have a strong reason and an adequate analysis.

What can traders do to separate themselves from emotions?

If traders wish to transact cryptocurrencies even though they know that they let themselves get carried away, practical, simple, and mathematical methods are required.

A perfect strategy to avoid destructive emotions is adequately preparing for a transaction. In addition, the research should be up to date and trending in the latest market direction. This preparation places traders in a better place from an emotional viewpoint and dismisses emotions like fear, anxiety, and uncertainty. Besides all of this, investors will be motivated to respect their chosen trading strategies.

Another critical step is to use trading orders like limit and stop-loss when setting buying and selling transactions on the exchange platform. This way, it’s less risky to wake up to losses or common mistakes. If someone wishes for automated trading strategies, they can resort to trading bots, where their fingerprint will be minimal.

Stay away from social media

When tired, stressed, or not in the mood, as well as when harsh situations appear in someone’s life, people tend to be more sensitive to being led by irrationalities when trading.

So to keep calm and a clear mind, it’s recommended to stay away from social media platforms at least for a while. These platforms offer some parallel fantasy worlds that do not always fit the market’s reality because crypto influencers often try to entertain and motivate their audience even when there are no good opportunities in the market.

Their posts can directly affect traders and people’s energy in the comment section. For example, if someone sees ten accounts saying that they will enter a position at a given time in a specific cryptocurrency, and they use another strategy with different numbers, this could represent a distraction or confusion, especially if the trader is not self-confident enough.

But how can we stay informed without social media?

We can choose a limited number of accounts to follow, websites, blogs, and YouTube channels with the best image in our vision — the ones we respect and trust the most. However, this information and data should only be used for guidance and inspiration, and traders should think critically and decide whether to include it or not in their strategies.

What’s clear is that every trader should set boundaries when it comes to sources of information, because not all information is equal in quality or truth.

Your Friendly Crypto Exchange is the perfect place to exercise your knowledge and skills and prove to yourself how well you can handle your emotions because you can do all of this safely and reliably. Register on IXFI to discover all the possibilities the crypto world has to offer.

Disclaimer: The content of this article is not investment advice and does not constitute an offer or solicitation to offer or recommendation of any investment product. It is for general purposes only and does not take into account your individual needs, investment objectives and specific financial and fiscal circumstances.

Although the material contained in this article was prepared based on information from public and private sources that IXFI believes to be reliable, no representation, warranty or undertaking, stated or implied, is given as to the accuracy of the information contained herein, and IXFI expressly disclaims any liability for the accuracy and completeness of the information contained in this article.

Investment involves risk; any ideas or strategies discussed herein should therefore not be undertaken by any individual without prior consultation with a financial professional for the purpose of assessing whether the ideas or strategies that are discussed are suitable to you based on your own personal financial and fiscal objectives, needs and risk tolerance. IXFI expressly disclaims any liability or loss incurred by any person who acts on the information, ideas or strategies discussed herein.