What is FOMO in Trading? Characteristics of FOMO
FOMO – Fear of Missing Out - is a relatively recent addition to the English language, but one that is intrinsic to our day-to-day lives. A true phenomenon of the modern digital age, FOMO affects 69% of millennials, but it can also have a significant bearing upon trading practices.To get more news about WikiFX, you can visit wikifx.com official website.
For instance, the feeling of missing out could lead to the entering of trades without enough thought, or to closing trades at inopportune moments because its what others seem to be doing. It can even cause traders to risk too much capital due to a lack of research, or the need to follow the herd. For some, the sense of FOMO created by seeing others succeed is only heightened by fast-paced markets and volatility; it feels like there is a lot to miss out on.
To help traders better understand the concept of FOMO in trading and why it happens, this article will identify potential triggers and how they can affect a day traders success. It will cover key examples and what a typical day trade looks like when it is driven by FOMO. There are various tips on how to overcome the fear, and the other emotions which can affect consistency in trading - one of the most important traits of successful traders.FOMO in trading is the Fear of Missing Out on a big opportunity in the markets and is a common issue many traders will experience during their careers. FOMO can affect everyone, from new traders with retail accounts through to professional forex traders.
In the modern age of social media, which gives us unprecedented access to the lives of others, FOMO is a common phenomenon. It stems from the feeling that other traders are more successful, and it can cause overly high expectations, a lack of long-term perspective, overconfidence/too little confidence and an unwillingness to wait.
Emotions are often a key driving force behind FOMO. If left unchecked, they can lead traders to neglect trading plans and exceed comfortable levels of risk.The psychology of trading is a key theme covered in our webinars, where our analysts share expert tips to keep emotions in check, maintain consistency and maximise trading success. Sign up to a webinar with our analyst, Paul Robinson, where he discusses FOMO and the psychology of trading in depth.
WHAT CHARACTERIZES A FOMO TRADER？
Traders who act on FOMO will likely share similar traits and be driven by a particular set of assumptions. Below is a list of the top things a FOMO trader might say, which sheds light on the emotions that can affect trading:FOMO is an internal feeling, but one that can be caused by a range of situations. Some of the external factors that could lead to a trader experiencing FOMO are:
· Volatile markets. FOMO isnt limited to bullish markets where people want to hop on a trend – it can creep into our psyche when there is market movement in any direction. No trader wants to miss out on a good opportunity
· Big winning streaks. Buoyed up by recent wins, it is easy to spot new opportunities and get caught up in them. And it‘s fine, because everyone else is doing it, right？ Unfortunately, winning streaks don’t last forever
· Repetitive losses. Traders can end up in a vicious cycle: entering a position, getting scared, closing out, then re-entering another trade as anxiety and disappointment arise about not holding out. This can eventually lead to bigger losses
· News and rumours. Hearing a rumour circulating can heighten the feeling of being left out –traders might feel like theyre out of the loop
· Social media, especially financial Twitter (#FinTwit). The mix of social media and trading can be toxic when it looks like everyone is winning trades. Its important not to take social media content at face value, and to take the time to research influencers and evaluate posts. We recommend using the FinTwit hashtag for inspiration, not as a definitive planning tool.
As well as affecting traders on an individual level, FOMO can have a direct bearing upon the markets. Moving markets might be emotionally driven – traders look for opportunities and seek out entry points as they perceive a new trend to be forming.