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FOMO Meaning and Definition in Trading

FOMO meaning describes the way people feel when sitting hours, days, or even weeks waiting with anticipation for the asset price to reach the expected level. You have established a working strategy. All systems and indicators are set. The MT4 platform is running smoothly.

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So, what’s next? Nothing is happening for a few minutes, then hours. You are left face-to-face with the monitor and tins of green and red numbers on it. Nevertheless, you keep steering without having enough will to leave it for some time. In this article, we will discuss the effect of FOMO in trading as well as FOMO definition, triggers, and simple steps to avoid it.

What Does FOMO Stand for?

The term “FOMO” stands for the fear of missing out. In other words, it describes the fear of leaving a trader’s room even when nothing is going to happen, and a trader knows it. The feeling can be affected by outer sources, which are most of the time to the detriment of the trading strategy. The term has been included in the Oxford Dictionary with a detailed FOMO definition.

While the world keeps going online with social media and internet communities evolving, the FOMO phenomenon has been magnified among not only casual users but also trades. FOMO in trading appears to be even a more serious issue that can define the possible outcome (either hit or miss), which inevitably affects the level of profitability.

The idea is quite simple. If at least 1 out of 10 traders is losing money while others make a profit, we will feel like we are also losing.

Major FOMO Triggers for Traders

According to specific studies, FOMO can be caused by different sources of information. It does not matter actually how we receive specific data. The main problem is what that info delivers. So, we have conducted a list of the 3 most popular and influential FOMO triggers:

1. Volatile Markets

Forex markets are extremely volatile. On the one hand, it provides more opportunities to win big over a shorter time frame. ON the other hand, it comes with greater risks. This fact makes market volatility one of the worst triggers to cause FOMO in trading.

Imagine yourself looking at a chart and expecting the trend to move mildly in a predicted direction. All of a sudden, the price makes a huge up or downside move. The first thing that comes to your mind is that you cannot miss this momentum. Your time has come! This is the best price you will ever get. Well, it is not. Volatile markets will always bring you a better opportunity. This is actually why they are called volatile.

2. New and Market Insights

Market insights and news (press releases) ate another driving force. Let’s face it, we’ve all been trying to capture a huge winning opportunity after a company has published a favorable (or not) press release. We just dream of being the first to press that button and make huge gains.

However, you are not the only trader out there to learn about the event. Keep in mind that there is always someone to write the press release before it goes live. It means that someone already knows about the news. No one is protected from the info leakage.

This is where newbies start experiencing FOMO. They think every trading guru is always 1 step ahead while the fear of missing out plays for them.

3. Social Media

Showing off on Instagram or Facebook has been brought by influences to a new level. We see hundreds of traders boasting their gains. You probably think that you are the one to be in his or her shows. It pushes beginners to jump ahead and make a move every time they see the chart pattern that looks the same.

Emotions are the major driving force that feeds FOMO. Fear and greed appear to be the most influential emotions that affect not only our actions but also markets. Some traders prefer using advanced technologies and automated trading platforms to avoid the human factor caused by FOMO, inability to control feelings, and other issues.

However, there are some simple tips on how to prevent FOMO in trading.

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3 Steps to Prevent FOMO in Trading

To overcome this effect, you need to understand and accept it. Even if you managed to cope with some of the issues, that will never guarantee FOMO will not come back. The following steps can lend you a hand in managing the phenomenon:

  1. Build a sufficient quantities strategy with results that are simple to track. The strategy should contain simple answers (yes or now) even to complex issues. Use pre-defined market entry and exit signals and stick to them whatever happens.
  2. Switch off social media completely. Avoiding the internet fuzz will let you stay focused.
  3. Avoid using hotkeys, as it will lead to trading on impulse. Think over your every step and make sure it follows a trading plan.

Use numerical measurements for every order to have a chance to compare and contrast the trade’s success. Whatever you do, never underestimate the role of risk management strategies and such fundamental instruments and the stop-loss and take-profit orders.

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.