Before becoming a financial “billionaire”, surely any trader must face the Fomo symptom on the Forex exchange. So what is Fomo effect that makes so many investors so uneasy? Let’s join Learn Forex Trading to learn details about the signs, causes, and solutions through the article below!
How does the Fomo effect in Forex affect traders?
The Fomo effect is probably one of the things that everyone has to be wary of. Because it is a psychological symptom of Forex trading that causes many serious impacts on traders. Before learning about the signs and causes, we need to understand what is Fomo in Forex.
Learn what Fomo is in Forex
Fomo in Forex stands for Fear of missing out. This is a psychological symptom of traders who are afraid of missing out on opportunities when standing in front of a crowd. When investors encounter this situation, they think that the people around them will have what they do not have. Therefore, people with FOMO will sometimes make irrational and wrong decisions.
In the stock market, FOMO makes traders always feel afraid of missing out on potential investment opportunities. People with the Fomo effect often tend to buy assets that are on the rise to make a profit without paying attention to the price. This action is mostly done without thorough market research, causing high risks.
See more: Forex is a great way to financial “billionaire”.
Who might be subject to the Fomo effect?
So who is susceptible to the Fomo effect? The answer is that anyone can suffer from Fomo, including experienced professional traders. However, some of the following people are more likely to suffer from Fomo, including:
- People who worry or are obsessed with success and getting rich when investing in stocks.
- Investors lack knowledge and experience about the market.
- Traders with high expectations or those who are overconfident are also susceptible to Fomo.
- Subjects have too high a desire to win, also known as “aggressive”.
Signs that a trader has the What is Fomo effect?
How to recognize the signs of what is Fomo effect? To know if you have Fomo psychology or not. Readers can check with some typical identification signs as follows:
- I always feel impatient when trading, because people with Fomo are impatient and difficult to control.
- Traders with Fomo do not have a trading plan, so they are often in a hurry and hesitate too long before entering an order.
- Investors’ updating of market information is delayed. That causes them to misjudge the situation, leading to inaccurate results.
- The symptom of having FOMO is not trusting your own decisions.
What is the difference between the term and what is Fomo?
If you are a long-time trader in the foreign exchange market, you are probably not too unfamiliar with terms related to Forex trading psychology such as Jomo and Fud. Let’s learn forex for yourself to learn more about the difference between these keywords and what is Fomo.
Distinguishing between Jomo and Fomo effect in Forex trading psychology
Jomo and Fomo are both terms used to describe psychological symptoms in trading. However, there is a huge difference between Fomo and Jomo that is easily recognizable. Where Fomo is a negative effect, Jomo is the complete opposite. Jomo is an acronym for “Joy of Missing Out” and has a positive effect on traders.
For people with the Jomo effect, they know what they want and what they are doing. These traders are not influenced by any factors and are always steadfast in their plans. Their approach is to always have a plan in place and trade based on research. Furthermore, the Jomo people will not follow the crowd and know how to wait for the right opportunity. That’s why people with the Jomo effect are often more likely to succeed than the rest.
What is the difference between Fud and what is Fomo?
So what is the difference between the Fud effect and what is Fomo? Fud is an abbreviation of the words Fear, Uncertainty, and Doubt. Similar to the Fomo effect, when encountering this effect, traders will always feel nervous and afraid. The main difference between these two psychological symptoms is the emotions they cause. Fomo often leads to ill-considered actions and the pursuit of trading opportunities without justification. Fub creates fear, uncertainty, and doubt, making trading less confident and making it difficult to make trading decisions.
What is the cause of the psychological symptoms What is Fomo?
Before offering a solution, we must know the source of the what is Fomo effect. The reasons why this Forex trading psychological symptom is becoming more and more popular can be divided into 2 types: objective and subjective.
Objective reasons affect Forex trading psychology
Among them, objective reasons affect the trading psychology of traders, specifically:
- The market grew strongly, stimulating the excitement of traders. At this time, it will be difficult for investors to control their psychology, leading to a lack of rationality when making decisions.
- Influence from unofficial news sources is widely spread online. Traders have difficulty distinguishing between real and fake news, putting investors in a disadvantageous position.
What are the subjective reasons causing the Fomo effect in Forex?
Most of the causes of the Fomo effect come from subjective aspects. So what are the reasons that come from investors themselves that cause them to suffer from Fomo in Forex?
- 60% of traders are afraid of losing opportunities when they obsess about gaining large profits. That causes investors to lose control and deviate from the outlined direction.
- The mentality of haste and impatience leads to decisions being made that often lack wisdom.
- Too much hope for a high result and a large profit will make traders follow the Fomo effect.
- Overconfidence in the financial investment market will create fluctuations that are difficult to resolve.
- Many traders follow the crowd because they have no specific strategy and lack understanding of the Forex market.
- Failure to manage capital and risks causes potential risks to explode, causing serious financial losses.
Negative impacts of the what is Fomo effect?
Not only does it affect the Forex trading psychology of investors, but the Fomo effect also negatively impacts many other related issues.
How do crooks use the Fomo effect to commit fraud?
Firstly, taking advantage of Fomo’s psychology of following the crowd causes crooks to create various forms of fraud. Scammers have taken advantage of the investment market becoming increasingly volatile and created mixed streams of real and fake information. With the widespread presence of such investment information, people suffering from Fomo syndrome will pour money into buying for fear of missing out on the opportunity to get rich.
In addition, they often organize seminars to spread false information to customers. If you are a person who lacks knowledge and is not mentally stable, you will fall into the trap. Then they will believe what they say and buy or push the price up.
In that case, we can see that fear is the biggest controlling factor. Therefore, any trader should train themselves with a solid psychological foundation and accumulate important knowledge to avoid the black hole called “FOMO”.
It’s easy to make mistakes when trading on the Forex exchange, causing losses
The second negative impact from what is Fomo syndrome. When suffering from Fomo syndrome, traders will be more likely to make mistakes when trading on the Forex exchange. Because Fomo can “manipulate psychology” causing investors to make wrong decisions. Specifically, they will just follow the crowd without understanding the market. The final consequence is the loss of the initial investment.
How to avoid the FOMO effect in trading?
After understanding the signs and causes of the Fomo effect. Next, Self-study forex will provide solutions to help readers avoid Fomo syndrome in trading, including the following 3 methods:
Clearly define your goals and make an investment plan on the Forex exchange
First, traders must clearly define their goals and come up with a specific investment plan. At the same time, you must always be steadfast with what you have set out to achieve the final goal. For example, you predict stock A will increase in price to 4 USD. You bought it when the price was 4 USD. The next day, if the stock price drops to 3 USD, don’t rush to sell it. Be consistent with the initial price set to avoid making mistakes that are out of control.
Orient your trading style accordingly on the Forex exchange
Second, you must orient your trading style. When you make short-, medium-, or long-term investment decisions, there will be different trading styles. For example, short-term trading following the Fomo effect will bring benefits. On the contrary, in the medium – long term, when influenced by Fomo, it will go in a negative direction.
Professional traders always know how to stabilize Forex trading psychology
Third, always know how to stabilize your mind when trading on the Forex exchange. So how can we be stable and not suffer from the what is Fomo effect? That is, you must equip yourself with a solid amount of knowledge. That information will help you orient the market and make more accurate decisions. However, traders must know how to select accurate and continuously updated information sources. To be able to receive better data, traders can rely on reputable investment websites such as Investing.com, and ForexFactory…
See more: Instructions for registering an Exness account
Some trading strategies help avoid the FOMO effect
According to the information above, we can see that Fomo often happens to subjects who do not have a specific strategy. Below are 4 strategies that can be applied long-term and limit the situation of Fomo that you can refer to.
Trade on Forex according to Price Action
First, traders can trade on the Forex exchange according to the Price Action strategy. This is the activity of analyzing charts and price patterns to make trend predictions. By focusing on live data, investors can determine entry and exit points based on price signals without worrying about the Fomo effect.
“Avoid” the Fomo effect by trading in a range
Additionally, traders can avoid the FOMO effect by trading in a range. So range trading in what is Fomo? The range is the range in which a currency pair fluctuates over a certain period. When identifying support and resistance levels within a range, traders can place orders to buy at the bottom and sell at the top. Thanks to that, traders can avoid buying when the price increases or selling when the price drops deeply.
Scalping application on Forex exchange
Combined with the use of Scalping applications on the Forex exchange helps traders profit from small fluctuations in price. This is a short-term strategy that helps avoid the FOMO effect. Because when traders only focus on quick and small transactions without being enticed by long-term trends or large fluctuations.
Smart Swing strategy helps trade on the Forex exchange smoothly
Besides, applying the Swing strategy also helps traders to trade more easily. This method will focus on catching long-term trends in the market. The trader must then patiently wait for appropriate entry and exit points without being affected by short-term fluctuations. This ensures decisions are based on technical analysis and are profitable.
Where can I improve my knowledge to avoid psychological effects in Forex trading?
Furthermore, traders can improve their knowledge to avoid Fomo psychology when trading on Forex. Among them, some sources of information and activities that traders can participate in include:
Traders can “practice” on the Forex exchange before making large transactions
One way to improve successful trading efficiency is to “practice” before trading. So how to practice before what is trade Forex? That is using a Demo account to get acquainted with the virtual trading environment. That allows traders to apply and test trading methods without risking real money. Besides, practicing on a Demo account also helps traders become familiar with the trading platform and build the necessary skills when making large transactions.
Learn Forex trading psychology experience on forums
In addition, online forums and communities are also places where traders can learn more about Forex trading psychology. Through discussions and following articles from experts, traders can access more diverse perspectives and better understand what is Fomo. At the same time, learning from online courses and consulting free educational materials is also something traders need to do. These documents are the key to helping you better understand the Forex market and bring yourself to success.
Accurately grasp the market situation through trading platforms
Forex trading becomes even easier when you know how to accurately grasp the market situation through trading platforms. For example Investing.com, Tradingview, ForexFactory… These platforms often provide technical analysis tools and news to help traders update the situation. Traders can even use technical indicators, price charts, and news… to make trading decisions based on reliable information.
summary
Through the above article, we can see that although the Fomo effect is an extremely scary symptom, it does not mean there is no way to overcome it. Hopefully, the information that Learn Forex Trading has updated above will help readers answer the question “What is Fomo”. Don’t forget to like and follow Self-study forex to update more useful knowledge.
FAQs:
what is Fomo? Is Fomo a negative or positive effect on Forex?
Fomo is a psychological syndrome of fear of losing investment opportunities in Forex. This is a symptom that negatively impacts traders’ psychology and trading decisions.
Are traders susceptible to the Fomo effect in Forex?
Almost any trader participating in the Forex market will encounter the Fomo effect.
How to avoid the what is Fomo effect?
To avoid FOMO, traders need to improve their knowledge, and skills and maintain their psychology in trading.
