FOMO – the Fear Of Missing Out – is a daily enemy for all traders and FOMO is influencing our decision-making as traders on many levels.
From making us jump into trades too early without confirmation, to closing winning trades too soon when we don’t want to give back profits, to risking too much because we cannot be patient when growing our trading account.
We want it all and we want it NOW. Does this sound familiar? Then FOMO is probably also a problem for you. In this article and video, I share why we are driven by FOMO and how to overcome this common issue.
What drives FOMO trading (Fear of missing out)?
FOMO can have a variety of causes and here are the common ones:
When you do not want to wait for the setup and just want to get into a trade because you fear that the price might run away.
No long-term perspective
When you do not understand that there will be hundreds and thousands of new trades waiting for you. Many amateurs put way too muchimportancet on one trade alone and want to force this trade to win whatever it takes.
When you think that you need to double your account by next month and you are missing out if you do not make a lot of money as soon as possible. This leads to higher risk and large position sizes.
When you do not have a system or rules, to begin with, then FOMO is your default mode, always jumping in and out of the market, not really knowing what you are doing.
Lack of confidence
After a few losing trades, many traders will try to play catch up and then enter random trades just to get into the market and hopefully somehow generate a profit.
When you come from a winning streak and feel invincible and then take random trades or too large positions because you think we can “feel” what the market is going to do.
There are a few very specific tips and concepts that can help you deal with FOMO in a better way:
Filters and rules
First of all, you need a trading system. A system gives you specific rules for entries, exits, stop and target setting, trade management, and risk management.
Rules will make sure that you have some structure and consistency in your trading (if you stick to your rules).
No-mid candle decisions
I encourage our students to follow this simple rule of just looking at the charts when the candle is closing and to only make entry and exit decisions when a candle is fully closed.
Mid-candle decisions are often driven by emotions and this simple but effective filter rule can improve your trading immensely.
Understand the implications of your system and your timeframe
It is so important to understand the timeframe you are trading. How many trades per day or week can you expect? How long do you usually go without a signal and what is normal waiting and holding time?
Backtest or go back to your journal to get those numbers and it will create a confidence once you know what you are dealing with and what to expect.
Man up – developing self-discipline and self-respect
In the end, you just gotta do what you gotta do and understand that there are no shortcuts to anything worth having.
We always know what we should be doing but we do not keep the promises we tell ourselves. We look for excused so that we do not look bad on the outside but inside of us WE always know that we messed up.
You need to overcome this and you have to develop self-respect. Start doing the things that you know are right. You can start in your daily life.
Instead of buying the chocolate, move past the candy section or get an apple. Instead of binge watching Netflix, study, read or journal your trades. Instead of drinking the 4th glass of wine, take a water and make sure that you are ready for the next day.
You have to develop your discipline muscle and it doesn’t have to be hard and overwhelming. Start small and prove to yourself that you CAN do those things which you know are right.