The fear of missing out (FOMO), is a very common anxiety among humans and it’s especially prevalent in new traders. We have all been taught since an early age to be in the know, be a leader and not a follower and to be first in anything we do. These are all important traits in the business world, but not necessarily in trading. The sooner you realize you are not going to lead any market and learn to be a follower when trading, the more successful you will be. It will also be less stressful. Being a follower is not to be considered chasing trades. A follower follows their plan and makes wise trade decisions instead of letting emotions like fear make the decisions. Do not worry if you miss the boat and feel like you have to chase after it. There is another boat leaving in the next few minutes.
Take a look at the S&P 500 chart below. How much of the big move up since the middle of February do you think is FOMO? Especially the second half of the run. What happens now that everyone is in? There are more sellers than buyers. We do not know for sure, but if this correction continues it could be fueled by the FOMO buyers once again making decisions based on fear and getting out because they are now losing money since they bought near the top.
How can you prevent yourself from being a FOMO trader? It goes back to the things we have discussed in previous blogs.
- Have a trading plan.
- Printout your trading plan and follow it.
- Before you take the trade. Ask yourself, does this meet all of the requirements for me to take this trade.
Yes, you will still have losing trades, but not being a FOMO trader will help you control the emotions and make better trading decisions.
I hope this was helpful.