What is FOMO?
This article will help explain what FOMO is and how you can avoid it allowing you to become a better trader or investor.
We’ve all been there. You’re scrolling through social media and everyone is posting about their gains and bringing in impressive profits. So why aren’t you? Why are you stuck in these coins that aren’t moving and there’s little to no volume being traded? To make matters worse the team who’s project’s token you’re holding haven’t released any news in weeks and so you begin to see no way for your project to pump. You’re stuck in your coin selections and begin to feel agitated.
On top of this your feed is flooded with the same cashtag over and over until it becomes synonymous with the notion that you are the only person not currently profiting from your investments and that everyone has seemingly made profit on this particular move.
You bite the bullet and you sell a bag at a loss so you can shift your funds over to the exchange in the hope you can catch a small wave of this bullish trend. You use this entire stack to try and ride the wave on a coin that has already done a 4x in the last week alone and is losing steam.
You finally get your entry and the coin begins to fall. 10%. 20%. 30%. You’re now even more underwater then you were before and have become a bagholder.
Welcome to the community.
You’ve succumbed to FOMO or the “Fear Of Missing Out”.
If I had to define FOMO within a crypto setting it would be this:
“Allowing your emotions to overcome your logic and cloud your thought process, often leading to bad decision making.”
There are a number of reasons why FOMO can occur and it’s of vital importance to notice when you begin to feel it approaching your mindset.
A good recent example of this would be MATIC which is a Binance coin that has risen 10x in value from it’s recent lows. My entire social media feed has been filled with MATIC cashtags and charts for the last week. I’ve even noticed people who don’t usually post charts try and jump on the bandwagon to ensure they are seen to be commenting on this recent move.
It’s only natural therefore to begin to feel like you want a piece of the action. After all, if you’re reading this then you are most likely here to make money first and foremost.
So to see other people seemingly profiting with ease can set off a number of emotions. Jealousy. Envy. Anger. Frustration.
Every successful trader will tell you that one of the most important skills to learn is to manage your emotions. If you can’t think clearly or effectively then this will hinder your vision and cause you to make decisions that you wouldn’t normally make with a level head.
So how can you learn to combat FOMO and keep composed?
There are a number of factors at play here to take into consideration. I’ll explore a few ideas and try to get you to understand more about yourself and your goals.
Ways To Combat FOMO
One of the most helpful ways I manage to combat FOMO is to think about the context of the situation. Let’s take the recent MATIC run as an example.
I have never opened up my own MATIC chart however I’ve had no choice but to watch the trade unfold over the last week almost in real time due to the nature of my social media feed. I have found myself begin to feel a little frustrated that I didn’t get in this trade because it’s all I’ve been exposed to lately.
To remove this thought I simply picture a random coin on another exchange that has done the same thing. Let’s say that made up project $FOMO coin on Huobi has also done a 5x over the last 10 days. I know nothing about this project and Huobi isn’t an exchange that I use regularly. So based on this information do I care that I didn’t get in this trade? Of course not – I couldn’t care less. This is because I’m not exposed to it. I’m not having to see it day in day out and witness people talking about their profits and gains.
The chances are there is a project right now at the time of writing this that has currently just done a 2x or 3x. There is ample opportunity in this space to make profit. You have time. So slow down and relax.
Think about the amount of exchanges there are and the amount of different projects that are now in the ecosystem. Don’t limit yourself to one exchange or a couple of projects. Once you begin to think in this way you can relax about the fact that yes you may have missed this particular opportunity, but there are golden opportunities every single day. You just have to take your time and find them.
Remember Who You Are
Another very important thing to keep at the front of your mind is to remember who you are. By this I mean are you a short term trader? Medium to long term trader? Or are you an investor? Do you like to make a trade every couple of days or do you wait for one a month?
A great tool to combat FOMO is to remind yourself of your strategy and approach.
I personally used to trade a lot on smaller time frames but I found this to be unsustainable due to my job and family commitments. So I made the decision to focus on creating content and take my mind off of short term trading. I now look for entries on the daily chart and feel a lot calmer seeing the time play out at a slower pace. I also like to pick solid projects with strong FA and invest, dollar cost averaging down when I have to.
Again I like to remember this when I see a project doing a 5x in a week. I wasn’t even looking at this coin to trade and it doesn’t fit my strategy. It’s not in my game plan so why should I be FOMO’ing over it? I made the decision not to trade this way so I need to stick by it.
The reason I invested in the projects I did is because I believe in them fundamentally and believe they will be greatly beneficial over time. Nothing has changed from this respect so I should not be looking to take money out to chase pumps just because I’ve seen a few people on social media profiting.
You also have to take into consideration that trading is some people’s full time job. They have the time to sit and go through every coin pairing and chart all day because they are dependant on that income. So if they’ve found a good entry then it’s because they’ve needed to. If you have a different style and have more time to pick your trades then just relax – you’ve already set your priorities so stick by them.
This is a fairly straightforward idea but if you do believe you will feel FOMO, and want to be involved in the latest trade setups that you are seeing. then have a dedicated trading stack.
Why not set 5% of your portfolio aside for situations like I’ve been describing? Maybe split these into five smaller stacks so you can try and enter the coins you see moving. This way you feel like you aren’t missing out but at the same time you’re also not risking much of your portfolio in case the trade turns against your favour.
Set targets. You have to have an exit point as well as a stop loss. If you’re going to FOMO in to a trade, take time to step back and think about a good entry level and where you are going to set your targets. It’s surprising how many people don’t have any sort of level set to cash out.
Good traders will post charts with their exit points so you can begin to gain a good understanding of where they think is a good idea to exit the trade.
Be sure to set your stop loss at an appropriate level below your entry point. When you’re in profit you can begin to move your stop loss up to guarantee that you at least make a certain % – this is known as a trailing stop loss. When you trail your stop loss you can be safe in the knowledge that you have locked in a certain amount of profit and this helps alleviate any stress about the trade.
It is inevitable that you will suffer from FOMO at some point in your crypto career and it’s to be expected. However with these tools and tricks hopefully you can begin to take a step back and understand why you are feeling the way you are and how you can combat this.
Remember that there’s no rush here. We all have plenty of time to achieve our goals. Take this time to plan out your strategy so when the new alt season does come you have an action plan and you’re ready for any scenario. The moment you go against this strategy and start chasing pumps with no real entry point is the moment you will have failed.
- Realise your strengths and weaknesses
- Slow down and take your time
- Prepare yourself for every scenario
Good luck and I hope this has guided you to become a better trader or investor
For my articles from Alex on The Daily Chain click here.
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