FOMO stands for Fear Of Missing Out. It is a common problem faced by both experienced and beginner traders alike. It is also one of the worst emotions to deal with in crypto trading and life in general. FOMO can cause you to make ill-advised decisions like investing in a shitcoin or DeFi project without doing your own research.
In this article, we’ll unpack what FOMO means in crypto trading and how crypto traders can avoid it.
What is FOMO in Crypto Trading?
FOMO in cryptocurrency trading means the fear of losing a potentially profitable investment or trading opportunity. It’s the anxiety you get when that coin you didn’t buy starts shooting up in price value or when everyone (except you) seems to be investing in the next big DeFi/NFT/Blockchain project.
What causes Crypto FOMO?
According to behavioral economics, market price movements are significantly influenced by both overall market psychology and individual emotional states or trader psychology. The fear and greed index indicates general market psychology at a given period. The Crypto Fear and Greed Index combines multiple data sources gathered from market trends and social signals into a single figure that shows the general sentiment of the crypto market at any given time.
Investing and trading in cryptocurrency comes with a rollercoaster of emotions ranging from panic to hope. Trading FOMO in crypto is caused by a combination of these emotions, particularly panic, impatience, jealousy, fear and hope.
How to Avoid FOMO Trading
The first step to avoiding FOMO trading is to accept that Fear of Missing Out is a normal thing to feel. FOMO affects everyone, both in the crypto ecosystem and beyond. Nonetheless, FOMO trading in crypto can be avoided or at least reduced by implementing and taking the following steps seriously:
- Set Up a Trading Plan
A crypto trading and investment plan should have all your long-term, short-term and exit plans, objectives and targets. It should also contain an outline of the coins in your portfolio and the coins you intend to buy. Traders who take the time out to set up their trading plans stand a better chance of effectively avoiding FOMO. Once you have a clear strategy and focused trading goals, you’re unlikely to fall for flimsy trading signals.
2. Analyse The Charts
“Facts over Feelings” is a good motto to follow when trading crypto. Learn to read and analyse cryptocurrency trading charts to understand the trends and trading patterns better. While your analysis may not always be spot on, it will provide you with a solid base to stand upon when FOMO shows up. Look at the charts from weeks or months, or years ago. There’s much to learn from looking at previous crypto trading and the price patterns that traders can apply to present and future trading.
3. Implement Risk management
In crypto trading, effective risk management involves various steps to reduce the impact of market dips and avoid total liquidation. The primary step to take before trading crypto is conducting comprehensive research that gives you all the necessary information you need to make your trade successful. Read more effective risk management methods for trading crypto here.
4. Focus on Your Trades
Comparison can inspire healthy competition in a person, but it can also make them lose sight of what’s important - their personal journey. As a trader, it can be disheartening to watch other traders make money and win big, especially from coins you missed out on buying. However, you must remember that you don’t know the full details of another trader’s journey to success. You’re better off focusing on your portfolio, trading strategies and goals.
5. Think long-term
Why are you buying a coin? What percentage of your income are you investing into the token? Are you ready for losses? What do you intend to gain from this crypto investment? What is your exit strategy? These are some critical questions any serious trader should ask themselves before investing. The answers will help you plan and work towards your goals without being bothered about FOMO. Long-term thinking always favors your finances more than short-term get-rich-quick thinking.
The fear of missing out in crypto trading is normal and can be managed. According to Warren Buffet, “The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.” This famous saying holds the key to managing FOMO. Pay attention to the market and the charts but stick to your trading plan while thinking long term.
Disclaimer: This article was written by the writer to provide guidance and understanding of cryptocurrency trading. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.