What is FOMO trading? Have you ever caught yourself rushing into a trade because everyone else was buying? Or worse yet, selling off all your positions because of a temporary price drop? If you answered yes, you might be guilty of FOMO trading.
Please keep reading to help traders understand FOMO trading and why it happens. This blog will cover key examples and a typical day trade when FOMO drives it.
FOMO, also known as fear of missing out, is a relatively new addition to English. Despite the acronym’s infancy, the concept is not new by any stretch of the imagination. In its most basic form, FOMO, or the need to stay connected continually and keep updated on social media, the 24/7 cycle of being in the know of things is driven by fear. These persistent yet insidious habits are known to peak our stress levels and narrow our attention spans.
Fear of missing out (FOMO) is a real feeling starting to permeate our lives. It’s best described as a feeling of social anxiety that other people are having fun without you.
From our social relationships, our intimate relationships, and even our careers, FOMO can cause devastating effects. Beyond even that, it can have a significant impact on our trading practices.
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Have You Ever?
- Rushed into a trade without following your trading plan?
- Rushed into a trade based on a hot tip?
- Did you feel regret after buying? (who hasn’t!?)
- She quickly closed a trade against your plan because everyone else was jumping ship.
- Panicked and sold all your investments when the stock market crashed a few months ago?
What It Looks Like
Suppose I had to give a simple example of FOMO trading, Following the herd. Or look to others to time the market when you should follow your trading plan.
From risking too much capital to getting a poor entry price, the consequences can be devastating. And FOMO is only heightened in trading by the fast-paced markets and volatility; it feels like there is much to miss out on.
Risks
Not to be harsh, but if you can identify with the following attributes, you may be at risk for FOMO trading.
- Are you looking to get rich quickly? Do you want to turn $5,000 into $50,000 quickly and with as little effort as possible?
- Are you willing to take stock tips from your golf buddy or brother-in-law at the weekend barbecue?
- Frequently trawling websites and magazines for nuggets of information you can turn for a profit?
- Are you eager to befriend an experienced trader for a free ride on their coattails?
Pump and Dumps & FOMO Traders
A pump-and-dump scheme artificially inflates a stock price through false, misleading, or greatly exaggerated statements.
And the people behind this scheme already have a position in the company’s stock. They sell their positions once all the hype has led to a higher share price. Typically, micro- and small-cap stocks are targeted in these schemes, as they are the easiest to manipulate. And if you remember reading our posts on volatility, low float stocks are the most volatile.
Due to the small float of these types of stocks, it does not take many new buyers to push the stock price higher. Which makes them prime targets for the pump-and-dump scammers. Anyone with access to a computer and an online trading account can perpetuate this scheme. All they need is to convince other traders to buy the stock that is supposedly “ready to take off.”
Unbeknownst to the other traders, the schemer is already long in the stock. And once other buyers rush in, the price increases, convincing other traders to buy heavily.
And guess what happens?
Predictably, the share price increases, and the schemer promptly dumps his shares. Unfortunately for the fools who fell for the scheme, the massive dump drove the stock price down, and they incurred significant losses because they could not sell their shares in time. Then, all they are left with is the dreaded “bag. “
FOMO Trading Habits
“If you cannot control your emotions, you cannot control your money.” Warren Buffett
Without a doubt, managing your emotions is one of the key traits of successful traders. Luckily, we have many ways to do this. You’re probably familiar with the phrase: “Plan the trade and trade the plan for those around you long enough.”
Traders who face the same opportunity must trade the same; personal feelings can’t interfere.
A key component of planning your trade is managing your risk.
Risk management in trading means you’ve planned and stuck to the trade before executing it. I can’t stress the importance of this, as it stops your emotions from clouding your judgment.
By planning your trade and trading your plan, you will be bulletproof. Planning your trades before taking them will be the difference between success and failure. You’ll often fail because you’re letting emotions cloud your judgment when you deviate from your plan.
Successful traders are methodical in their approach; emotional traders don’t last.
Ahead of time, any profitable trader knows the price they’re willing to pay and sell. When the return is high enough, and the chart indicators match their criteria, they place the trade.
Take a look at unsuccessful traders. What do they have in common? Firstly, they enter trades without figuring out their profit and loss targets. Secondly, they have no idea what price they will sell at.
Unfortunately, this causes emotions to take over when the stock empties. When emotion dictates trades, you’re well on your way to blowing up your brokerage account.
COURSE |  |  |  |
|---|---|---|---|
| DESCRIPTION | Learn how to read penny stock charts, premarket preparation, target buy and sell zones, scan for stocks to trade, and get ready for live day trading action | Learn how to buy and sell options, assignment options, implement vertical spreads, and the most popular strategies, and prepare for live options trading | How to read futures charts, margin requirements, learn the COT report, indicators, and the most popular trading strategies, and prepare for live futures trading |
| INCLUDED | Daily watch lists • Trade rooms • Trading scanners • Discord • Live streaming Day Trading > | Daily watch lists • Trade rooms • Options scanners • Discord • Live streaming Options > | Futures target levels • Trade rooms • Real time teaching • Discord • Live streaming Futures > |
7 Things FOMO Traders Say
- “Everyone’s doing it; it can’t be that bad.”
- “Just think of the money I could make…”
- “Sure, why not? What do I have to lose?”
- “If I don’t act now, I might miss out.”
- “I should have seen that coming.”
- “I’m so stupid; I can’t believe I did that.”
- “Someone must know something I don’t.”
Avoiding FOMO Trading
Undoubtedly, the Bullish Bears trading room and live screen share are the most helpful features subscribers can access.
The moderators review the different stock picks and setups during the screen share. They point out why the stock would not be the right candidate for a trade.
Moreover, hearing and seeing how a trader analyzes a stock provides members with invaluable information, way more than a simple trade room shout-out where everyone rushes in blind to buy.
Bullish Bears go out of their way to make sure you don’t go in blind. They flat-out refuse to shout out plays. They want you to learn how to trade to make your own decisions. Quite frankly, this is how a trade room should be.
Final Thoughts: FOMO Trading
FOMO trading is real. Keep your eyes on your own lane; plan your trade, and trade your plan.
Bullish Bears offer tons of free content and courses and a free trial, so you can come in and see what it’s all about. We don’t pump and dump, nor do we call our plays.
We give you a full play by play analysis of the stocks, pointing out patterns, support and resistance, trading psychology, trends, indicators and more.
Make the right choice with us today.
