Fear of Missing Out, or FOMO, often leads investors to make rash decisions that can harm their portfolios. FOMO, when implied in the trading of cryptocurrencies, can refer to making purchases of cryptocurrencies such as Bitcoins without much thought. It can also refer to selling off one’s assets prematurely before it hits the peak, which leads to lower crypto gains. FOMO arises from the notion that other traders are successfully earning a lot of profits, and one might miss the train if they wait for too long. This thought compels them to take action without proper thought. Other than that, a lack of a perspective that can perceive long-term visions and overconfidence also result in FOMO. For more information about crypto trading, click Learn more.
How can you identify a trader that functions out of FOMO?
All traders that make decisions out of FOMO have some things in common. The first thing is the idea that if everyone is taking a step, it cannot be wrong. If everyone is either buying or selling, it is the right thing to do. That is what a person with FOMO believes. Trades governed solely by greed often end up badly. Additionally, indecisiveness is another indicator of a trader that suffers from FOMO.
What adds to FOMO?
The fear of missing out can stem from several instances. One of the most common instances that gives birth to FOMO is the occurrence of a volatile phase in the market. No trader wants to miss a chance to make a profit. Therefore, compulsive decision-making during a volatile phase of the market is what signifies FOMO. Recent winning streaks in the crypto market can also add to the FOMO a person goes through. Repetitive losses also function in order to add to the FOMO of traders. News and rumors spread over social media and other means also add to the fear of missing out.
How you can overcome FOMO
Don’t worry if you are guilty of acting purely out of FOMO. You can always take steps that can help you become a disciplined trader. Let us focus on the steps that you can take to do so:
- Availability of another trade: Good trades are like buses. One comes after the other goes, and one must go for the other to come. Therefore, you must keep in mind that this is not the last time you are going to get a good trade. You can always keep an eye on the market movements and get a better trade than before!
- Stick to a trading plan and a strategy: It is very important that you, as a trader, have a planned strategy of how you are going to invest in the crypto market. Without a proper plan in motion, you are bound to incur losses most of the time. You must devise a plan for yourself, and stick to it, even when the going gets tough.
- You should use the capital you can afford to lose for crypto trading: You must be aware of the fact that the crypto market is a very volatile one, and investors can lose their profits and more. Therefore, you must only invest the amount you are okay with losing. This amount should not affect your financial stability.
- Keep a Trading Journal: You can also create a trading journal to record all your trades, which will remind you of your trading patterns and choices that have benefited you over time. By keeping a trading journal, you can avoid making rash decisions out of pure emotions, saving you from losses.
Therefore, it can be stated that fickle-minded decisions are a result of FOMO, and they can prove to be catastrophic if it happens to affect one’s trading decisions. However, there are certain steps that you can take before making a purchase over one of the many bitcoin trading platforms to avoid acting out of FOMO. These steps include being aware of one’s financial position and knowing how much one can afford to lose. By investing this amount, the financial stability of an investor will not be compromised. It is also suggested that you devise and follow a trading plan thoroughly during crypto-trading.