FOMO (“Fear Of Missing Out”) is the acronym for a concept used in trading (and in other areas of life) to describe the behavior of the trader who enters the market “chasing the price” so as not to miss a trade. That is, for fear of being left out.
FOMO is a syndrome that we must try to control, as it is decisive for our operations.
Have you ever thought that you were staying out of a movement? Or that everyone was earning except you? That is FOMO.
The FOMO you should try to control it, as it can be your worst enemy, since it aligns itself with your emotions and makes investment decisions for you, hastily, and obviously without taking into account your trading plan.
How do I know if I have FOMO?
Unfortunately, unless you are a very rigorous trader with great emotional control, you are going to have FOMO. I would even tell you that we can all have FOMO under certain circumstances. The problem is not having it, it is identifying it and working on its control.
Here are some examples so you can recognize it:
- Do not wait for a clear confirmation to enter the market.
- Entering an uptrend, regardless of the distance of your Stop.
- Entries that do not correspond to your Trading Plan.
- Entries in news candles that shoot in one direction.
- Exit a long position and re-enter quickly to see that it continues to rise.
- Close a trade prematurely so as not to lose what has been achieved.
These are just some examples of the FOMO, but I think they are enough for you to identify if you suffer from this syndrome.
The solution to FOMO
If so, we must first learn to identify it. As in any other aspect of psychology, the essential element to treat a psychological problem is its detection.
Once we are aware of this, we must establish under what circumstances we act in this way, to anticipate this type of behavior at certain times.
It can be said that FOMO leads to instinctive behaviors, which our brain innately generates. Therefore, we must be alert to any abyss of this type of behavior, and when we identify it, have the necessary self-control to identify it and not take the action.
For this, there are various psychological techniques such as visualization or denial of the stimulus.
Psychological techniques to control FOMO
Visualization consists of imagining a certain type of situation before it happens. Once we have that situation in mind (for example, a huge candle that unexpectedly triggers the price in one direction as a result of a news item), we must imagine what our instinctive behavior would be (enter the trade) and then imagine the possible consequences adverse (we came out with a great loss when we were caught).
Once we have it visualized, we visualize the ideal behavior, the one in which we stay cold and do not enter the operation since it is not within our trading plan. We visualize the satisfaction that self-control gives us and the feeling of achievement by being faithful to our trading plan.
This exercise is very powerful for our mind, as it helps us anticipate the reactions we may have and visualize the consequences before the situation occurs, so that when it occurs, we are already prepared to face it.
Another very useful tool can be something as simple as closing the screen. It may seem absurd, but I assure you that it is very complicated to do and highly effective. When we detect that feeling of FOMO, if we are not able to react mentally, we close the screen so that we do not have the option of executing an order under our emotional self.
As I said, knowing how to control the FOMO is a key factor in our operations. I recommend that you dedicate part of your time to work on that psychological part and leave aside the graphics a bit. I assure you that your operations will improve.