FOMO, or Fear of Missing Out, has been a common, trendy phenomenon for a few years in this modern, digital age. Statistically speaking, nearly 69%+ of millennials are drawn to and act upon FOMO. Retail traders are also familiar with FOMO because, for them, missing out on good opportunities to profit is the most common event in their journey. FOMO in trading is the mental state of a trader when they are afraid, overconfident, or hesitant about missing out on big profit opportunities in the market. This is a purely emotional issue for a trader, which barely has any rational reason behind it. Behavioural economics and human psychology are the driving forces in the journey of a trader’s trading journey.
Like every other psychological hurdle, FOMO in trading needs to be approached and solved accordingly. Professional traders are experts at handling their FOMO while trading, but this is a major step down for novice traders, mostly retail day traders.
FOMO in trading has various kinds. Among them, these ten are the most common scenarios,
What Are the FOMO in Trading?
1. FOMO out of a breakout trade (False breakout)— Taking trades when the price has already moved from the entry point and thinking this trade setup won’t come again.
2. FOMO out of a breakout trade (Actual breakout)
3. Being on a losing streak/starting the day with a string of losses.
4. Seeing other traders profit but not you
5. Having a winning trader that gets stopped out
6. Taking profit ahead of your profit target
7. Hesitation- the entering of trades without enough thought
8. Closing trades at inappropriate moments because it’s what others seem to be doing.
9. News and rumours.
10. Social media, especially financial Twitter (#FinTwit).
How Do You Feel in the State of FOMO?
During the state of FOMO in trading, check if you are feeling,
How to Approach FOMO in Trading?
1. How did this FOMO arise in the first place?
2. In what situation did the market make you feel and execute FOMO trading?
3. What was your thought process?
4. If you had not entered, what could have happened then?
5. What might be the plausible risks that you could take to minimise the losses that you had to face in the FOMO trade?
6. Was that a wise decision?
How to Battle With the FOMO in Trading?
The solution to FOMO for traders and the best way to battle this fear is to practice and maintain certain steps blindly.
1. Journaling : For each and every trader, journaling is a must. However, in the case of battling with emotional trading out of fear, or FOMO, journaling helps the most to keep a track of all your mistakes. Keep detailed notes of all the FOMO trades and write down every little detail so that if the market pattern repeats again, the mistakes should never be repeated.
2. You must master fundamental trading analysis.
3. Wait for the confirmation of the breakouts and prices to retrace to a certain level to predict whether it is feasible to enter the market or not.
4. Set a daily loss limit and a losing trade limit before you lose sight of your intention.
5. Do not enter a trade if you cannot afford to lose money. Stop being casual about trading. Treat it like a business, because a smart trader will eat you alive.
6. Don’t change your profit target position even if the market moves according to your plan. You never know when the market will move in the opposite direction from you.
7. There will always be another chance to take profit from the market.
8. STICK TO YOUR TRADING PLAN
9. Patience is the key to success in the forex trading journey.
10. If your trading strategy is not working and giving you a string of losses, then stop trading and start with a demo. Because you need to create a solid trading strategy that gives you a better winning rate