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September 23rd, 2022. Simply put, FOMO (fear of missing out) refers to buying or selling or longing or shorting assets without much thinking. There's no difference in FOMO in stocks or crypto, since making investment decisions based on hype or instinct is harmful either way, no matter if the market movement is to the upside or downside.
Although some would say that FOMO is a trading strategy, we think that strategic and emotional thinking just doesn’t go hand in hand. Today, we’re talking about the dangers of FOMO trading, and how to gain control over your emotions and make savvy moves that will maximize your gains and minimize losses.
FOMO Trading Cycles
Instead of paying attention to the charts and analyzing market movements, traders easily fall prey to manipulative marketing tactics.
The fear of missing out on major money-making opportunities can mess up rational thinking. That’s when traders FOMO trade – get greedy and buy in without diving deeper into the reasons behind the price movement.
However, due to making decisions based on hype, some of them get anxious shortly after, especially once the price starts twisting and turning in the opposite direction.
Yet, there’s another side of FOMO. Once the market starts dipping, traders tend to get impatient and fearful and sell some or all of their assets, trying to desperately minimize losses.
Some of them also believe that selling at a small loss would actually allow them to stack up more tokens at even lower prices. The likelihood of this scenario ever happening is rather small. Instead, the price stabilizes at a certain point and even bounces back to an even higher point than before.
So, basically, those who are led by FOMO are constantly on an emotional rollercoaster that involves fear, greed, impatience, and anxiety, and they are constantly losing, too!
How to Avoid FOMO Trading?
Volatility and cryptocurrencies can’t exist one without another. Thus, traders and investors should plan their strategies and next moves wisely, predefine entry and exit points and strictly stick to them.
You should stay away from making decisions based on news, Tweets, or rumors. Even though these scenarios may play out, the movement of the price is typically short-lived.
Sooner than you realize, your portfolio would be suffering, and thus, you should either be prepared for the eventual losses or simply train yourself to ignore both sudden crashes and sudden price increases.
If you are an investor rather than a trader, simply do DCA (dollar-cost averaging) and buy your preferred coins over some time in equal tranches.
As already mentioned, it’s easy to get greedy once the prices are skyrocketing. Get caught by FOMO and you’ll be buying near the top or at the very top. Setting orders can help with not feeling overwhelmed once the market starts bleeding but you won’t get the urge to buy at the highest price, either.
Even the most experienced traders and investors have fallen victim to FOMO trading at least once. Learn how to resist it, and you won’t be losing sleep, staring at the charts, and trying to time the market perfectly. Instead, you can set your limit orders with Lykke, and snag your favorite cryptos at a low price or sell them once the price touches the highest highs.
Oh, and did you know that Lykke is a 0% fee crypto exchange? Not having to pay any fees, you’ll be able to truly maximize your profits. Sign up with Lykke today!