How to fight FOMO in crypto trading
When it comes to crypto trading, FOMO can be your enemy. FOMO, or the "Fear of Missing Out," is a powerful emotion that can significantly impact your trading decisions.
First described by Dr. Dan Herman in an academic paper in 2000, FOMO gained notoriety in the trading world a few years later thanks to Patrick McGinnis' opinion piece in "The Harbus" magazine. As a result, the acronym has become a common term among traders, and for good reason.
At its core, FOMO is driven by anxiety — the fear that you're missing out on a better opportunity. This could be triggered by a dramatic headline, social media post, or knowing another trader that makes a big profit on a digital asset. When FOMO takes over, reasoning and making informed trading decisions can be challenging.
It's essential to understand the impact FOMO can have on your trading decisions. To help, we've put together some steps to overcome and manage it.
Steps to overcome FOMO
Do your research
Another acronym to get acquainted with is DYOR or "Do Your Own Research". As a fundamental step, take the time to thoroughly research a digital asset before investing in it. DYOR will help you avoid making impulsive decisions based on FOMO.
Have a trading plan
Create a clear trading strategy and stick to it: Having a defined trading strategy can be your lifeline once you jump into the sea of crypto. Setting entry and exit points will help you avoid making impulsive decisions based on FOMO.
Diversify your portfolio
Trading a range of digital assets can help reduce your risk exposure and prevent you from feeling like you're missing out on a single opportunity.
Use stop-loss orders
Set stop-loss orders to automatically trigger a sell order if the price of a digital asset drops below a certain level. Selecting a stop-loss will help you limit your losses and avoid making emotional decisions in a panic caused by FOMO.
Avoid checking the market too often
Having your eyes constantly glued to the market or charts can feed into your FOMO and lead to impulsive decisions. Instead, consider setting aside specific times of the day to check market activity.
Be self-aware
Be aware of your thoughts, actions, and emotions when you trade. For example, if you notice feelings of FOMO creeping in, take a step back and re-evaluate your trading strategy and goals.
Take a break
It may be challenging, but if you become too emotionally invested in a particular digital asset or feel overwhelmed by FOMO, take a break from trading. Giving yourself this time and space will help reset your logic and reasoning, gain perspective and help you make better decisions in the long run.
Whether you're a crypto vet or just starting crypto trading, remember to keep your FOMO in check and make rational decisions based on solid research and market analysis.
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