When I see this increase on BTC, I have to admit that it’s hard to resist the FOMO.
You’ve been watching all these charts of Bitcoin, Ethereum and all the altcoins constantly in motion. You’ve been scanning your screen carefully, looking for a trend reversal.
And then you see one. Finally.
It’s like a release.
All of a sudden, you see that the market has just made +10% and you jump at the opportunity. You buy hoping that it’ll climb even more.
It would be a shame to miss a train that goes to the moon, right?
And then the market collapses. It’s the drama. You bought high, you sold low…
You know what this is called? FOMO.
Where does FOMO come from?
The Fear of Missing Out comes from the idea that others are making money, that you also want to make the most out of it and that for this, you must not miss any opportunity.
This often leads traders to make some of the worst mistakes possible.
Why? Because trading requires patience and reasoning.
Do you recognize yourself in these situations?
Here are some of the most common thoughts of FOMOers, leading them to make mistakes:
😤 “I knew it!” This usually comes from a trader who had planned a purchase but ended up not making the trade. Next time, he won’t react so rationally and will probably make a mistake.
😩 “I could have made that much money today.” Everyone would be a millionaire in retrospect.
😴 “There still is room for growth…” — A trader who buys late after being too scared to enter.
🤔 “I have a feeling…” — A trader who does not follow a plan with strict rules and entry criteria.
🙄 “I’m just going in with a little position.” — A trader who justifies not respecting his rules.
So? Do you recognize yourself in that?
Why should you resist the FOMO?
FOMO traders see prices going up and they buy because they fear the price will continue to go up without them.
The problem is that they enter their order before the situation actually satisfies all their rules, which means that their risk management and expected risk/return ratio will not be respected.
What often happens later is that the price turns before it reaches the expected point, and they end up with a losing position.
How to resist FOMO?
Stick to your plan.
It can happen that you have an almost perfect configuration, with a single criterion that does not match your trading conditions. You then see the price move sharply in the direction you expected, while you are still on the sidelines.
This is obviously painful, and it is exactly in situations like these that traders tend to engage in FOMO trading.
Instead, be patient and move when the time is right and according to your strategy. This is the right way to approach trading and the only way to fight FOMO.
To achieve this, you need a trading plan and a “checklist” with all your criteria. Print it if you’re afraid to forget and put it next to your screen.
Believe us, by printing your conditions, you will be much less tempted by FOMO and you will quickly see your overall trades improve.
Founder & CEO of Crypto-Addicts
This article was originally posted in Crypto-Addicts’ VIP Telegram Channel on May 29th 2018.