Surely any investor has suffered from the FOMO effect. However, there will be people who can escape and there will be people who get stuck in the mud and lose everything. In this article, Learn Forex Trading will help you better understand the concept of FOMO as well as the causes of the above effect. Let’s read to learn how to prevent it and gain more experience to help gain optimal profits in investment.
Explain what the FOMO effect is.
The FOMO effect, also known as the Fear Of Missing Out, is a psychological symptom that makes people always afraid of missing out on opportunities if they don’t follow the crowd. Meaning, you will often follow the crowd, even though you are sure of victory in your hand. Because you are afraid of being left out if you don’t keep up with the economic cycle trends.
What is the psychology of investors when suffering from FOMO in Forex?
In Forex, the FOMO effect is a very common symptom seen among traders. Regardless of whether you are a new investor or an experienced trader. The psychology of suffering from FOMO syndrome in Forex will make traders always feel like they “will miss” the opportunity if the price of a stock increases continuously. At this time, Forex trading psychology will urge you to buy stocks immediately without having to learn or analyze the development potential of that stock. Therefore, when suffering from FOMO, traders will make decisions based on emotions, causing the possibility of trading failure to increase.
See more: For traders to succeed with economic calendar
What is the severity of FOMO symptoms?
The FOMO effect not only appears in stock investment but also occurs in everyday life. This psychological symptom can have serious effects on sufferers. For investors, negative impacts are always unpredictable such as:
- This causes traders to always be in a state of nervousness and fear in Forex trading.
- FOMO makes you unable to focus on trading and distracted by external mass trends.
- The “fear of missing out” mentality directly affects the decision to buy/sell orders, reducing the possibility of accuracy.
- This causes traders to lose profit opportunities and increases the risk of failed transactions.
The reason why traders often suffer from the FOMO effect
So what causes traders to suffer from FOMO symptoms in Forex? This is something that traders need to firmly grasp to help themselves avoid suffering from the FOMO effect. Below are some reasons stemming from subjective factors from traders such as:
Forex trading psychology is fear of losing opportunities
Firstly, due to Forex trading psychology, traders are always afraid of losing opportunities. Perhaps the obsession with huge profits has caused investors to deviate from their proposed strategy. Typically in these cases, investors do not sell stocks when the expected profit is achieved. When the stock price plummeted, they were unable to react in time. In just a few short minutes, traders can lose both their principal and the profits they have earned.
Obsessive FOMO effect due to lack of knowledge and experience about Forex
The second reason is a lack of understanding of Forex market knowledge. Usually, this factor will appear in beginner investors who are new to Forex. Because they have not had much time to research and accumulate trading experience. That causes them to make decisions based on emotions, follow the crowd, and be influenced by the FOMO effect.
Falling into the trap of Trading FOMO due to not having a clear strategy
FOMO Trading psychology often occurs in traders who do not have a clear strategy. If you don’t take the time to research and establish a strategy for yourself. When the market fluctuates, you cannot chart a suitable direction for yourself. Therefore, the buying and selling decisions made at that time were completely based on sense. If the stock starts to drop a little then they get scared and sell off the stock. That invisibly causes them to lose the rare opportunity to get rich in financial investment.
Forex trading psychology is too ambitious
The final reason is that Forex’s trading psychology is too ambitious. When traders have too much expectation of profits, they will be carried away without stopping. They only expected stock prices to increase continuously to earn profits, but life never expected that. At the last minute, the stock price plummeted, causing them to lose all their principal and profits. From there, it can be seen that the stock market is a fierce and easily manipulated place. Therefore, just being a little subjective is a vulnerability that can lead to losses at any time.
See more: How to register ICMarkets broker account
What is the experience of avoiding the FOMO effect trap?
So what is the way to escape the FOMO trap? You can easily overcome the FOMO effect by applying the following measures:
- Research the market carefully: One of the causes of FOMO is a lack of understanding. Therefore, you need to firmly grasp the knowledge of the market, finance… This is the basic foundation to help you build a reasonable investment strategy. At the same time, always remember to be loyal to the plan you have given and avoid following the crowd.
Experience in avoiding the FOMO trap and ineffective trading
- Master your emotions: Emotions are the enemy of all traders. Without a cool head, you will be easily influenced and influenced by emotions. Remember, take time to consider before making any decisions. That is the secret to helping you control your emotions in the best way.
- Change your strategy flexibly: You can avoid FOMO if you know how to be flexible in your strategy. You should not apply the strategy rigidly but must know how to adjust and adapt. That will help you improve trading efficiency when the market is volatile.
- Cut losses promptly: You should be confident in your strategy and understanding to cut losses at the right time. Don’t worry because many great investment opportunities are waiting for you ahead. If you don’t cut your losses promptly, you will lose your capital and even go broke.
summary
It can be said that the FOMO effect is a big rock hindering a trader’s success. However, if you know how to improve your knowledge and keep a cool head, you can overcome it easily. Hopefully, the above sharing of Learn Forex Trading will partly help readers better understand what FOMO in Forex is as well as how to avoid traps effectively. Don’t forget to follow Self-study forex to receive more useful information about the field of financial investment, such as the organization of the FED or economic cycles…!
FAQs:
Who can suffer from the FOMO effect in Forex?
FOMO psychology can happen to any trader (even experienced traders).
What are the signs to detect FOMO symptoms?
Some signs of being caught in the FOMO trap are: following the crowd, not having a specific strategy, not analyzing the market, being influenced by emotions…
What strategies are there to overcome the FOMO effect?
To overcome FOMO in Forex trading, you can apply strategies. Including: determining a plan, and combining Stop Loss and Take Profit orders to manage risk.
