Since FOMO is a psychological phenomenon, it's essential to deal with it from a psychological point of view. If you want to build a strategy to overcome FOMO, you need to change your thinking process. The key part you need to work on is the fear aspect.
Fear in trading occurs when we perceive a threat. The critical issue that we need to understand is that fear instills not because we have missed a trade, but the issue is that we regard that to be a threat to our success.
When our brain feels attacked or threatened, we're more likely to act impulsively. The obvious conclusion is that we can overcome FOMO by eliminating the threat factor. We're all going to have missed trading opportunities throughout our trading careers.
Examples of FOMO in the crypto space
There are many examples of FOMO in the crypto world. For example, when Bitcoin prices surged in 2017, there was a lot of FOMO among investors who missed out on the rally.
This caused many people to buy into the hype and invest in Bitcoin, even though they may not have fully understood how it worked. As a result, when prices started to crash in 2018, many people lost a lot of money.
Similarly, during the ICO craze of 2017-2018, there was a lot of FOMO among investors who were worried about missing out on the next big thing. This led to many people investing in new projects without doing enough research or due diligence. As a result, many people lost money when the ICO bubble finally popped and prices crashed.
Lastly, there was also a lot of FOMO around new projects and coins that are being developed on top of Ethereum’s blockchain (known as Ethereum tokens or ERC20 tokens).
This is because Ethereum has become very popular over the past year and its platform is seen as being very innovative and promising. As a result, there is a lot of speculation and investment in new Ethereum-based projects even though most of them are still in very early stages with no real products or user base yet.
Overcoming Emotional Trading
A practical way to overcome FOMO in trading is to change your thinking process. What we mean by this, is to change your thinking pattern about missed trading opportunities.
The fundamental principle to get a solid grasp of is that our thinking creates our responses. In other words, if we perceive missing a trading opportunity as a threat, we're for sure going to trade impulsively.
The good news is that we can learn to change our thinking by reprocessing our minds. We do this by keeping a trading journal where you write down the consequences that occurred as a result of taking a trade based on FOMO.
The most common negative consequence as a result of FOMO is that impulsive trading often leads to losing trades. This is primarily due to the fact that when we are under the effects of FOMO, we tend to "chase" trades.
Chasing trades means that sometimes we would buy a coin even after it has risen a lot, just because we are fearful of missing out on the big profits. Therefore we end up buying high, and when the coin eventually drops, so do our profits.
Bottom Line: You need to change your thinking process by focusing on the consequences of FOMO so that the next time you miss a trading opportunity, you associate that fear with the negative effects of FOMO.
