How to Fight FOMO in Crypto Trading?

FOMO - Fear Of Missing Out - is a daily opponent for all crypto & other market traders, and it influences our decision-making on several levels.

FOMO – Fear Of Missing Out – is a daily opponent for all crypto traders, and it influences our decision-making on several levels. From forcing us to enter trades too early without confirmation, to closing profitable trades too soon since we don’t want to give up earnings, to risking too much because we can’t be patient when expanding our crypto trading account.

Humhe sab chaiye aur aaj ke aaj hi chaiye! Does this sound familiar to you? Then FOMO is undoubtedly an issue for you. This piece will explain what FOMO is and how you can avoid becoming a victim of it. Let’s explore it!

What is FOMO in Crypto Trading?

FOMO is an abbreviation for “Fear of Missing Out,” which is a common psychological anxiety among traders. FOMO occurs when a trader is concerned about the possibility of losing a profitable crypto trade.

We are all aware that decision-making is difficult, particularly in crypto trading. Traders who are concerned with big profits may become emotionally unstable and make blunders motivated by greed or a sense of failure. As a result, these irrational actions jeopardize traders’ potential success.

FOMO in Crypto Trading

Furthermore, FOMO occurs frequently when traders compare themselves to wealthy experts with impressive accomplishments and unimaginable profits. An everyday trader succumbs to despair and follows market trends without thorough research or a clear attitude in order to achieve the ideal trader image.

FOMO, for example, develops when a positive trend gains traction. Your trading is influenced by market emotion, news, and the rising desire to enter or depart the market due to the gradual price increase. So, FOMO clouded traders’ heads and forced them to make judgments based on fear of losing gains. 

Assume you open a trade at the peak level of a rising crypto. The market then pulls down, and you continue to hold on to a crypto trade due to FOMO, believing that it is not the end. However, a long-term negative trend emerges, and you see you’ve failed.

And after a while, you learn that FOMO leads you to behave hastily out of remorse, greed, and envy. Remember, most people who follow the crowd eventually lose. By the way, you are not a lone wolf in this race, around 56% of crypto, stocks, and forex traders suffer from FOMO.

Factors Triggering FOMO Crypto Trading

FOMO is an emotional feeling that can be triggered by a variety of scenarios. Some of the external reasons that may cause a trader to experience FOMO are:

▪️ Highly Volatile Markets: FOMO isn’t just for optimistic markets when individuals want to jump on a trend; it can come into our minds when the market moves in any direction. No trader wants to miss a good chance.

▪️ Massive Winning Streaks: When you’re riding high from a previous victory, it’s easier to discover and seize additional possibilities. And it’s okay because everyone else does it, right? Unfortunately, winning streaks do not last forever.

▪️ Back-to-Back Losses: It can lead to a vicious cycle in which traders open a position, become terrified, close out, and then re-enter another trade as worry and disappointment build from not holding out. This might potentially lead to larger losses.

▪️ News & Speculation: Hearing a rumor spreading might exacerbate the impression of being left out; traders may feel as if they are out of the loop.

▪️ Social Media Manipulation: The combination of social media with trading may be deadly when it appears like everyone is winning deals. It’s critical not to take social media material at face value and instead investigate influencers and assess postings. 

FOMO may have a direct impact on markets in addition to influencing individual traders. Moving markets may be emotionally motivated, with traders looking for chances and entry points when they believe a new trend is brewing.

Why FOMO is Dangerous for Traders?

As mentioned before, FOMO can be really harmful for traders. It creates a big obstacle to becoming a better trader, clouding your judgment and rationality when making trades. It’s important for all traders to try to avoid FOMO for a few reasons:

▪️ Inevitable Losses: Keeping a clear head and staying objective is crucial in trading. FOMO, however, makes you overly emotional and impulsive. To become a successful trader, it’s necessary to stick to a well-thought-out trading plan, conduct thorough market analysis, and have a solid risk management strategy. 

▪️ Lack of Discipline: Discipline is key in trading to sustain your career and prevent professional burnout. FOMO disrupts your trading discipline, leading to increased risks, deviation from trading plans, emotional instability, and ultimately, significant losses.

▪️ Difficulty in Setting Stop-Loss Orders: Fearing missing out on a profitable trade often leads traders to enter the market late, when prices are already high. This exposes them to the risk of further losses.

▪️ Drawdowns: FOMO can result in substantial drawdowns, requiring wider stop-loss positions to survive, which in turn lowers the potential reward.

▪️ Developing Bad Trading Habits: Profiting from certain trades due to FOMO doesn’t mean it’s a sustainable strategy. Eventually, the winning streak will end, leading to devastating losses.

How to Fight FOMO in Crypto Trading?

FOMO is your enemy, and you must learn how to overcome it on your journey to great trading success. Here’s a collection of recommendations on how to avoid the fear of missing out:

Crypto Trading FOMO

▪️ Accept the Problem: Do not try to escape your dread of missing out on some trading possibilities by engaging in the following emotional breakdowns. Accepting your psychological issue is the first step towards healing and good trading.

▪️ Strengthen Your Trading Discipline: It is critical to arrange your trading schedule. It would be beneficial if you developed a working and resting schedule, with the working time being carefully arranged. This self-management gives traders confidence and stability in their performance, preventing panic trading and irrational behavior.

▪️ Set Your Trading Goals: Aimless trading is usually a failure. In this instance, you will be directed by transient impulses, which result in FOMO behavior.

▪️ Adhere to Your Trading Plan & Strategy: The first rule of a good trader is to construct a comprehensive trading strategy that includes entry and exit factors, position size norms, and a risk management plan.

▪️ Work on Your Mentality: Never ignore your mental wellness. A trader should obtain adequate sleep and physical activity to keep focused and objective.

▪️ Extend Your Trading Horizons: You should never stop growing as a trader. Every day is a fresh learning opportunity. We propose that you learn about many methods of trading analysis, including fundamental, technical, and sentiment. Then attempt to modify your analysis to changing market conditions.

▪️ Invest Funds You Can Afford to Lose: If the transaction does not go your way, you should be content with the amount of capital you will lose. The sound investment will prevent emotional breakdowns and misunderstandings.

▪️ Keep a Trade Journal: Keep track of your trades in the trading journal. This tape will teach you what works and what doesn’t in order to improve your trading skills and increase your profits. Logic and analysis enable you to prevent FOMO.

Conclusion

FOMO may have a significant influence on trading decisions. However, if you understand what it is and how to cope with FOMO in crypto trading, you may reduce its impact on your trade.

Trading is an art that relies on facts and probability. When you respond to unpleasant emotional cues, you tend to underperform. As a trader, you must limit not only FOMO but all unfavorable reactions to various emotions. It’s simple to say, but difficult to accomplish.

To learn more about FOMO in crypto trading, go check out SunCrypto Academy.

Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. All content provided is for informational purposes only, and shall not be relied upon as financial/investment advice. Opinions shared, if any, are only shared for information and education purposes. Although the best efforts have been made to ensure all information is accurate and up to date, occasionally unintended errors or misprints may occur. We recommend you do your own research or consult an expert before making any investment decision. You may write to us at [email protected].

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