How To Get Rid of FOMO
For good!
Every decision we make involves opportunity cost. Whether it’s deciding to stay home or go out, what job to take, what ice cream flavor you should have, and where you should invest your money. There’s always something else you could be doing instead.
Maybe you chose vanilla ice cream when chocolate would’ve been better. Perhaps you should’ve gone out that night instead of staying home. If you bought [insert asset] last week, you’d be up 30% right now. All of these give us FOMO (fear of missing out) because we believe we could’ve made a better choice.
Many professions require you to eliminate emotions to perform at your best, and trading is no exception. We all experience FOMO to some degree because we’re human. It’s a strong emotion that can lead to terrible decisions like chasing trades and doubling down. Here’s how we get rid of it, for good:
Where does it come from?
To eliminate FOMO, we must understand where it comes from. Research suggests people are more affected by losses than gains of equal size. This makes sense - our instinct is to avoid the pain that comes from being left out. If everyone you know is making money, you’d want to join in.
The markets reflect this feeling on a massive scale. When you have large numbers of people experiencing FOMO at the same time, bubbles occur. People bid higher and higher to avoid being left out, even if the price doesn’t make much sense.
It’s important to be aware of this phenomenon so you can be on the right side of it. It happens very often on all timeframes. When price makes a strong move in one direction, everyone wants a piece of the action. The question remains - how do we prevent this feeling from affecting us?
The Grass is Always Greener…
There are many different markets, from stocks and crypto to forex and futures. At all times, at least one of these is experiencing a huge move that would’ve made you a lot of money.
It’s impossible to catch all of them. Even trying to catch a few is difficult. Your odds of catching a big winner are low and random - it’s not that different from a slot machine.
You might feel envious when you hear that someone made money by catching a huge pump but remember: for every big winner, there are many big losers. Most traders fail in the long run. Even if they do win big, they’re unlikely to keep it, so you shouldn’t be getting FOMO when you see people posting huge gains. The grass is always greener on the other side!
Experienced traders don’t get fazed when they see people posting huge gains. Why? They’ve seen it enough times to know it’s only luck. Traders beat the odds by relying on their strategy, which has an edge that will give them consistent profits over time. They’ve removed most of the luck from the equation.
Stick to Your System
If you don’t have tons of experience with your system, you shouldn’t be looking at other markets. Doing so will only leave you confused and overwhelmed. Stick to the market and timeframe you’re working with.
If you’re trading Tesla on a 4-hour timeframe, you shouldn’t worry about a penny stock going up on a 1-minute timeframe. If you’re trading Crude Oil on a 5-minute timeframe, you shouldn’t worry about what Bitcoin is doing on the daily timeframe.
You can think of it like learning an instrument. If you want to learn the violin, you’d practice and focus on the violin for an extended period of time. It wouldn’t make sense to switch to the guitar after a week and then to piano the week after.
You wouldn’t improve in any of them - you need to be consistent to build the momentum you need to truly excel.
After you’ve perfected the violin, switching to other instruments is easy because you already have the experience and structure in place. Your trading strategy works the same way. If you don’t have experience, you won’t improve by trying to catch moves outside of your strategy.
Once you’ve mastered a strategy, you can bend the rules a little and try to catch some moves. Your intuition and risk management will be strong enough to save you from horrible outcomes.
If you haven’t, you should have no business trading outside your strategy. Remember, trading opportunities are like buses - there’s always another one coming. By having confidence in your strategy, you won’t feel the need to look for moves elsewhere.
That concludes our discussion today. Subscribe and stay tuned for more!
- Tradewriter
Disclaimer: Any content from this newsletter should not be taken as financial or investment advice, but for informational and entertainment purposes only. This newsletter simply shares my personal opinions. Investing in stocks, bonds, futures, options, and other securities carries significant risks. Some or all capital may be lost. With leveraged instruments, losses may exceed initial capital. Past performance of a security does not guarantee future results. Consult with a registered financial/investment professional. This newsletter and its authors are not licensed financial/investment professionals. By reading and using this newsletter, as well as any other publications, you are agreeing to these terms.