FOMO. What are traders afraid of?
25.10.2022 | asorokin
What is FOMO
Traders and investors, regardless of their experience, face the fact that they miss the opportunity to earn.
The feeling when you have not received a profit is called FOMO (fear of missing out).
This condition occurs not only because of lost money, it is characteristic of people who, comparing themselves with others, feel that they could achieve more, look better, travel more often, spend their free time more interesting and so on. FOMO is a natural reaction when a person is dissatisfied with something in his life.
Even if you don’t usually experience this syndrome, when you start investing in different assets or trading on the stock exchange, you will most likely encounter it. Most often, the lost profit syndrome occurs in those who are engaged in cryptocurrency or other similar assets with high price volatility.
How does FOMO express
FOMO causes anxiety, frustration and anger. The strength of these feelings varies depending on the individual characteristics of a person and his ability to cope with negative emotions. It also has a big impact on how much money you have not received or lost due to the desire to earn more.
The main causes of FOMO and their consequences
Selling ahead of time
Sales ahead of time can be divided into two main categories:
- the deal closed when it was originally planned, but the price rose even higher;
- the deal was closed earlier than originally planned due to the fear of not having time to sell and miss out on at least a small profit.
In the first case, greed manifests itself. Despite the planned tactics, it was possible to get more. This makes it a shame, especially when the exchange rate has grown significantly higher than expected.
In the second case, the sale is made impulsively, the person is under stress already at the time of its commission and will experience the fear of not earning anything at all or even going into negative territory. When an order with a larger profit changes to an order with a smaller one, and as a result, the price breaks through the initial level and goes even higher, it becomes not only insulting, but also anger towards oneself appears. Such an impulsive decision is regarded as a mistake. It is more difficult to deal with the manifestation of FOMO in such a situation than in the first case, since it is more difficult to justify your actions.
The second case is peculiar to beginners who do not understand well how the market works and do not know how to cope with the syndrome of lost profits. Traders with this behavior are called “hamsters”. They are also most often faced with the following manifestations of FOMO.
Selling when it’s too late
When the price starts to rise and the trader waits until it reaches the maximum value, the rate may change its direction sharply and go down. In this case, newcomers do not want to sell, because they did not earn as much as they wanted and they are sorry to sell lower than the price was quite recently. The rate may continue to decline, then the trader decides to sell in the negative until he has lost everything he has. This impulsive decision is dictated by greed and fear.
After the sale, the price is likely to turn up if the general trend has not changed and the collapse has not started. If the price exceeds the value at which the order was made, then there will be a sense of lost profits and anger that the decision to sell was too impulsive and thoughtless.
Fear of investing money in the wrong asset
Traders and investors often refuse to invest in a risky asset that can bring losses. This approach is not always correct. Instead of the expected decline, the price may show explosive growth. The missed opportunity to increase capital brings disappointment and resentment.
Disappointment due to the fact that they missed the investment unknowingly
This manifestation of FOMO is mainly faced by people who were not interested in the topic of cryptocurrencies due to personal prejudices. The most popular example of this feeling of lost profit is the refusal to buy Bitcoin when it cost less than $1.
How to deal with FOMO
The basis of the fight against FOMO is the acceptance of the fact that it is impossible to earn all the money. It is impossible to predict the outcome of each price reversal and the prospects of the project. Trading and investing are always fraught with risk, so do not forget about the possibility of loss, especially at the early stages of exploring the world of cryptocurrencies.
If you have earned at least something, this is already a good result, do not devalue your achievements, even when they are small.
If you lost money by investing in a failed project or sold it at the wrong moment, you don’t need to feed yourself and get upset. A good result always consists of successes and failures.
The best strategy when investing is to use only the money that you are ready to completely lose and not take other people’s funds on credit.