With all the number of trades at your disposal and your endless desire to make money, can you say NO to a few trades? Can you, really? What if that one trade you turn down turns out to be the trade of the year. It is this feeling that lures you into many trades without much deliberation and is commonly known as Fear of Missing Out aka FOMO. There are many forms of FOMO, and anyone form influences almost every trade you make.
FOMO: An analogy
You know technical analysis inside out. You know that you should wait for the candle to close above (or below) a specific value for a setup to ferment. But, all goes out of the window, when you see a running candle cross a critical resistance. You feel it is the end of the world and convince yourself that there is no other setup as perfect as this. And so, you envision the prices to skyrocket from here, and you can’t get it any cheaper than the current price. You succumb to your emotion of fear of missing out the trade and initiate a long trade at the highs (or short at the lows).
It is not about right and wrong of technical analysis. But when a decision is backed by emotion, it often proves to be dumb.
FOMO: Draws stupidity out of the ingenious
FOMO happens to everyone in the field of trading. Even the brightest stars and experienced veterans are no exception.
It is the primary reason why many intellectuals fail to make a mark in trading, despite having a high IQ. Yet, it goes unnoticed.
The problem#1 with FOMO is that it catches you exactly when you are most vulnerable and desperate.
Desperation is when you are in a slump and want to get back on track.
Vulnerability#1 is when you are watching the chart for hours and couldn’t find a trade.
Vulnerability#2 is during high impact newsbreak when volatility is at its peak.
It hits you hard when it pains the most!
FOMO is an act of impulse. You act with your brain in hands and emotion replacing that vacuum. Hence, with zero planning.
It essentially means you don’t know –
- Stop loss
- Most importantly, whether you’re right or wrong.
Here are a few scenarios for better understanding.
Scenario#1 You are clueless about the market and it spikes (or plunges) in one direction. Although you can’t resonate the move, you don’t want to miss it out either, so you enter.
Scenario#2 You analyze and forecast a bullish move (or bearish move). While you await the breakout, the market moves in the exact opposite direction. So, you presume that the analysis is wrong and merely go with the momentum.
Scenario#3 When you are away from your system, your hands itch to check out the mobile of what’s brewing in the market. You make a trade out of it too, now and then. (Insanity at its core!)
Scenario#4 You are in a buy trade, say EUR/USD. It moves to the expectation, but it’s buddy GOLD, is going all guns blazing and surpassing it. So, you feel missing easy bucks. Hence, you close out EUR/USD and initiate a new position in Gold at the highs.
The result of these scenarios is irrelevant. You have succumbed to your emotions, hands down, and got trapped in a no man’s land. Most of the times, you won’t even know whether you’re right or not. Yet, you desperately clinch onto the trade, hoping for a miracle. Sometimes, a miracle does happen and get you out of the mess without harm. And other times you are clobbered!
The problem#2 with FOMO is that it feeds you now and then with tidbits. So, you never question your actions. Instead, you attribute it to jargons like ‘bull or bear trap’.
Downsizing the implications of FOMO
First of all, FOMO is not confined to trading. It is in our everyday lives as well. Say, you’re gazing at the charts not wanting to miss trade opportunities (FOMO, concerning trading). At the same moment, you see your brother head out to a party; now you feel you’re missing out the enjoyment, which is also a FOMO. So, it is part and parcel of our life. Only in trading, however, you pay a hefty price. But, can it be wiped out of our system?
It is difficult to take down FOMO per se from the system. It takes immense effort, self-discipline and commitment from the individual to nudge it down. There are mind hacks which we share here, to aid your endeavor.
Face it, face to face!
The first step in dealing with any psychological problem is accepting it. Because, if you don’t, you are never going to look out for a change. So admit it.
Now say it out loud: “Market produces hundreds of setups a day. I can’t trade every one of them. I don’t care if I miss one either. Because there is always another trade.”
It’s a sigh of relief, huh?
You know it already. Yet, subconsciously deny it. Saying it out loud tunes your mind to accept the reality.
You don’t deserve it
When you have not planned for it or worked for it, you don’t deserve it. You can’t possess what you don’t deserve. If you ought to go for it, you end up paying a hefty price for it.
It’s just how the world is wired.
Get it into your head!
If you don’t deserve it, then there is no missing it.
Trading is never meant to be easy. When it seems likely, it most likely is a trap!
Learn to Say NO
There is a brief difference between need, want and desire. Needs are the essentialities that you want from your trading career, say extra income.
Whereas, wants and desires are luxuries, which often precipitates as greed. So, schedule the wants and desires for the latter part of your career.
There comes a time, the right time, to be aggressive and go for your cravings, when you are mentally and financially equipped. Until then, be content with what you get from the market. Be satisfied and learn to let go of the trades, even the deserved ones, if your needs are satiated.
Focus on the experience — Live the moments to its fullest
Once you are acclimatized to the market, everything becomes a mundane routine. As a result, complacency creeps in. It is then you are most vulnerable, yet you remain oblivious to it.
Studies have shown that practicing mindfulness is a witty tact against FOMO, arising out of complacency.
So, rather than going for the bucks merely, make a habit of enjoying every step of your trading process.
Ask yourself why you started trading, often? Money! Yes, it is. But apart from it, there are always other factors that enticed you, say the adventure of predicting daily movements. Find yours and rekindle your passion often.
Most of all, experience every activity of trading consciously — analyzing the charts, applying indicators over it and deploying risk management principles.
If possible, relish and rejoice.
Savor the occasions when you are elsewhere
Don’t sit by the all system all day and gaze the charts.
It’s not hard work; instead, it’s an addiction.
So, stipulate the timings you need to assess the market and trade. (Do you know the market produces the finest movements only in specific sessions?)
Rest, spend it qualitatively with your friends and family. After all, you’re a normal human being!
Never check trading quotes when you are away from your system. It paints a gloomy, grimy portrait of your life — long, short, bull, bear, major pairs, minor pairs, etc.
Disciplined trading needs a truckload of mental stamina and it eats you up slowly, lets you lose grip of reality. It is like a pressure cooker waiting to explode the instant it gets a chance. Often our mind overcomes it by making a stupid trade decision. It’s the predominant reason your winning streaks don’t last long. And when a loss follows after a streak, you usually let a sigh of relief.
The austere is hard to get back once lost.
So, to preserve it, consume energy from your other world — the real world.
Release your pressure in the real world and not on the trading floor.
Associate the meaning of your life to your trading, so that you can endure the pressure.
Alas, some good news for you. FOMO decreases as you age up.
So, you don’t have to put up with this life long.
Shrug off the negative thoughts of missing out. Instead see the positive side to it, that you weren’t on the opposite side of a trade and lost it. Else, be grateful for what you get from the market. Either of these attitudes gets to you naturally as you mature, until then, make a conscious effort to do so.