FOMO – or the ‘Fear of Missing Out’ – is truly a phenomenon of the digital age, common among all humans with an internet connection. Indeed, having direct access to information about what friends, family and strangers are doing can cause high degrees of social anxiety in modern times.
While the internet has made trading more accessible than ever, traders are not immune to FOMO. This fear can have a string of negative effects on traders, so it’s important to learn how to overcome it in order to become a successful trader.
What does FOMO look like to traders?
The feeling of missing out can cloud a trader’s judgments and lead them to open positions too early, or close them too soon, resulting in losses that could easily have been avoided. FOMO can also cause traders to open risky positions in order to try ‘catch up’ with their peers, who may appear to always be a step ahead.
Emotions such as greed, excitement, jealousy, impatience and anxiety are the key drivers behind FOMO. These emotions may lead to a cycle of losses – buying early out of excitement and selling early out of anxiety.
Understanding emotions is a crucial aspect of trading psychology, so we’ve put together a few tips to help traders manage FOMO:
- Don’t Ignore Market Volatility
When everyone seems to be profiting from a bullish market except you, it might be tempting to hop onto the trend ASAP. But remember that markets can swiftly change direction, and you may be better off opening an opposite position to your peers if you’re entering the market at a later stage.
- Stay Humble
It’s all too easy to let a winning streak go to your head. You may have recently spotted a new opportunity to profit, or tried out a strategy that works well for your trading style. Either way, you should always analyse your risks before opening a position, to ensure that you’re not getting carried away by your recent wins!
- Don’t Lose Heart
On the flip side, if you’ve experienced a series of losing trades, don’t let fear prevent you from getting back in the game. Maybe you need to hold your positions open for a little longer, or simply try out a different strategy. The ability to learn from your mistakes is one of the key attributes of a successful trader.
- Be Wary of Rumours
As a trader, you may have heard the saying ‘Buy the Rumour, Sell the News’. This can be a successful strategy for some Forex Traders, but rumours don’t always turn out to have a solid basis. Of course, it is necessary to take risks, but traders will do well to research news and events before buying into a rumour they might have seen circulating through social media!
- Practice, Practice, Practice!
Finally, the foolproof way to overcome FOMO is through practice. Whether it’s through a free Demo Account, or via a Live Trading Account, only experience can teach traders how to understand and manage their emotions properly. Once you’re able to identify your emotions, you can prevent unnecessary mistakes and focus all your energy on profiting through your trades!
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