Conquer FOMO In Trading In 2 Steps

FOMO in trading means the fear of missing out and it can negatively affect our decision-making process where we take a trade for reasons other than it’s part of the plan.

It is a powerful emotion that is no doubt responsible for more blown out trading accounts than any other reason.

Do most people feel it?  In a 2014 study by Boston Consulting Group, Nearly 7 in 10 (69%) millennials experience FOMO (mostly due to social media).

For a trader, it can be devasting.


What Causes FOMO in Trading?

Making money is powerful and evokes many emotions.  When a trader looks at a trading chart and sees large price moves in the past, they imagine the money they could have made.

They believe, usually incorrectly, that they could have made huge profits in the move.

Here are some common reasons traders will experience the fear of missing out which will prompt them to push the buy and sell buttons.

  • Volatility has entered the market, momentum is strong and markets are surging.  Traders feel this is a big move in the making and jump in so they can be a part of it
  • Traders have exited a trade for profits but the market keeps moving.  The FOMO trader wants to add to their gain and clicks the trade order buttons
  • A losing trade is taken but price turns around.  To make back the loss and not miss the move, a trader puts risk on in the market

Any time you feel you are about to miss out on a big move, kick yourself for not taking a trade, not taking profits, not taking your stop loss, is FOMO in action.

The fear of missing out is a consuming feeling and can show up physically where your heartbeat quickens and you start to sweat.

It can show up in your thoughts where you only consider the reward and not risk management in the trade.

You almost react, like a reflex, to pushing the trade order buttons.

deal with fomo in trading

Steps To Overcoming FOMO

We can’t short circuit emotions but we can mitigate the effects of emotions if we recognize when we are acting from them.

How do we do that?

Pay Attention To Your Signs

Everybody will experience FOMO in a different way.  Some will have the urge to trade while others will use self-talk like:

  • “I know this is going to be a big winning trade”
  • “I will just use half risk so if I am wrong, I don’t lose a lot”
  • “It worked last time”

Once you notice your triggers and FOMO experience, get away from the screen.  Fast.

Use Your Trading Plans

In any other business, people have business plans to guide their actions.  Experienced traders have trading plans they follow before entering a trade to keep them disciplined and consistent.

For every trade, you must ask yourself if it fits what you’ve outlined as a trading opportunity.  If it does, take the trade according to your plan, set your stops and targets (unless trailing stops are used), and let price do what it is going to do.

Trade only in accordance with your trading plan and not your feelings.  Take yourself out of the equation and just execute.


Successful Traders Are Disciplined

A trading plan will go a long way toward avoiding FOMO and damaging your trading account.  Without the discipline to follow the plan, it is useless.

I would love to say there is an easy path to ridding yourself of impulsive trading decisions and sticking to your plan.

But there isn’t.

It requires you to set goals for your futures and asking yourself if your present action is taking you to or from the goal.

If your trading plan that you have tested does not show a trade but the market takes off, there will always be another move.  How does it make you feel?  Journal your thoughts and feelings setting them free so they can’t do damage.

There is no shortcut.  Know your triggers, deal with your triggers, and follow your trading plan.  It won’t happen overnight but eventually, the nagging feeling to “do something” will be tamed.

Author: CoachShane
Shane his trading journey in 2005, became a Netpicks customer in 2008 needing structure in his trading approach. His focus is on the technical side of trading filtering in a macro overview and credits a handful of traders that have heavily influenced his relaxed approach to trading. Shane started day trading Forex but has since transitioned to a swing/position focus in most markets including commodities and futures. This has allowed less time in front of the computer without an adverse affect on returns.