(Updated Oct. 21)
DEFINITION of FOMO
FOMO is the acronym for Fear of missing out. That is pervasive apprehension that others might be having rewarding experiences from which one is absent.
WHAT IT IS IN ESSENCE
FOMO is a more personal thing. Its the fear of missing out on something that others are enjoying. For example the fear of missing out on Bitcoin gains while others are picking out their luxury cars.
FOMO might drive you to buy into a coin, not take profits on a coin, or not to set stops on a coin that has already gone up considerably.
It is the idea you get in your head that rational profit taking or waiting for a reentry point now will result in you missing out. This fear of missing out is what causes people to buy at the top or hold during a dip after making profits.
Only to lose some or all of their profits again. People can be said to get FOMO when they act on impulse due to the fear of missing out.
It is emotional and fear-based factors that affect traders in the crypto market and in other markets as well.
The most important element in FOMO is the word “fear”. It makes us do things even when we necessarily don’t want to.
It’s like logic versus emotion.
When a compelling option is presented to us, we feel like an outsider if we say “no” to that. We may even fear that we miss an opportunity of a lifetime if we say “no”.
HOW TO USE
Two moves fight against this trading mistake:
Stick the fundamentals and charts. If a coin’s chart looks good, and the fundamentals are there, stick to your strategy and take emotion out of it.
If you think the price of a coin will drop irrationally, set your stops and be prepared to buy back in on the dip.
Of course, that is very general advice that won’t apply to every situation. For instance, it depends on your trading strategy and if you are long or short.
Thus, there is one bit of good advice we can give you: Don’t make trades based on your fears. However, if you predict that others will react to fear, calibrate your trading strategy accordingly.
In summary, say no to FOMO.