Type: 1 Fear - Fear of Missing Out (Most prominent)1) Fear of missing out:
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What Is FOMO?
The fear of missing out refers to the feeling or perception that others are having more fun, living better lives, or experiencing better things than you are. It involves a deep sense of envy and affects self-esteem. It is often exacerbated by social media sites like Instagram and Facebook.
FOMO is not just the sense that there might be better things that you could be doing at this moment, but it is the feeling that you are missing out on something fundamentally important that others are experiencing right now.
It can apply to anything from a party on a Friday night to a promotion at work, but it always involves a sense of helplessness that you are missing out on something big.
Another article published in Computers and Human Behavior found several trends associated with FOMO. Fear of missing out was found to be associated with a lower sense of having one's needs met as well as a lower feeling of life satisfaction in general.4
FOMO was heavily linked to higher engagement in social media, as other studies have suggested—it appears that FOMO is linked to both feeling a need to engage in social media and increasing that engagement. This means that FOMO and social media habits may contribute to a negative, self-perpetuating cycle.
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A brief History
The idea that you might be missing out on a good time is not new to our era. However, while it has presumably been around for centuries (you can see evidence of FOMO in ancient texts), it has only been studied during the past few decades, beginning with a 1996 research paper by marketing strategist, Dr. Dan Herman, who coined the term "fear of missing out."1
Since the advent of social media, however, FOMO has become more obvious and has been studied more often. Social media has accelerated the FOMO phenomenon in several ways. It provides a situation in which you are comparing your regular life to the highlights of others' lives.
Therefore, your sense of "normal" becomes skewed and you seem to be doing worse than your peers. You might see detailed photos of your friends enjoying fun times without you, which is something that people may not have been so readily aware of in past generations.
Social media creates a platform for bragging; it is where things, events, and even happiness itself seems to be in competition at times. People are comparing their best, picture-perfect experiences, which may lead you to wonder what you are lacking.
::::: Two Branches of FOMO in Trading
We briefly touched on this idea in the article we published about fears in trading, but let’s elaborate in order to clarify a few false conceptions that inexperienced traders have when they approach trading.
Understanding FOMO is important because it’s the first step in the difficult journey to adjust your brain in order to retrain this fear. One of the reasons that rewiring your brain to counter-attack FOMO is difficult is because the fear works on two contrary emotions:
You see your trade has more potential and you don’t want to get out of it -or- You see your trade retracing and eating your floating profit and you want to protect your already made profit.
These feelings put you, the trader, in a difficult situation. Should you have hope of a good break even though it will be at the expense of losing while trade is heading towards retracement or breaking even? Or can you hold on to trade and squeeze more potential out of it? This is the core of the conflict that creates FOMO in trading.
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FOMO From Outside the Market
Another element of fear comes when you’re on the sidelines watching the action in the market. When you’re flat and not in the market but you see opportunities upcoming, you might be compelled to hastily enter the market prematurely or enter late and miss an opportunity entirely.
Or let’s say you saw your trade coming to the level you would want to enter it but not all conditions had been met for the entry. But the missed trade showed that it would have been a slam dunk for you.
Premature FOMO
Now the scenario repeats itself but you have time to make the trade. The trade is forming with the same pre-signs but they’re not perfect yet. Your FOMO kicks in and pushes you to enter prematurely this time which can cause severe drawdown sometimes stopped out by your stop loss or not entering at the right risk-reward position for your trade. Acting out of fear prevented you from getting the most out of your entry.
Post Trade FOMO
On the flip side, related to the recency effect, you experienced a good trade, and the rally you expected looks to be starting. You saw the confirmations but the market has moved along. You jump in late and enter your trade after the rally already started.
In this example, the FOMO on a good rally will make you jump late on the trade and with that, expose you to more drawdown due to entering in the middle range of a price. When you’re in no man’s land you can suffer massive drawdown retracements and also your RRR will be very low because you have to allow a wide stop loss position in order to survive.
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Ways to Minimize it :
Here are several ways to help you cope with FOMO:
Do Not Expect The Perfect Trade
The First step to tackling this problem is to understand and convince yourself that you cannot expect the perfect trade. Every time you stick to your plan and are about to trade, train yourself to not expect the trade to be perfect.
Stick With Your Trading Plan
The next step is to put reasonable and realistic entry and exit points in your plan and only take these. Don’t change the points after you take a trade. If you do, it will just spoil your upcoming trade and all you’ll be doing is losing your trading plan. Over time, your whole plan and portfolio will unravel if you keep on this path.
Embrace Your Emotions
Don’t ignore your emotions, it’s okay to be disappointed that you lose and feel successful when you win a trade.
You need to be aware of your feelings, you need to know when you’re not at your peak, and you should stay away from the screen, maybe not trade that day. Learn how to respond in any emotional way, insert it into your trading plan, so you’ll know next time how to act.
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Happy trading , May god bless you all with tones of happiness and satisfaction.
