Yep, today’s topic is about fear.
FOMO is short for Fear Of Missing Out.
I’m sure you’re already familiar with the feeling. It’s something almost everyone goes through at some point in their lives.
And as traders, it plagues us more often than not…and if not controlled, leads to making emotional (and wrong) decisions.
What drives FOMO?
Like I always say…
FOMO is driven by a desire to be a part of a good thing, even when all signs suggest that it is not a wise investment.
Traders (especially beginners) tend to believe that was has happened in the recent past will continue on into the recent future.
But if you’ve spent some time in the markets…
You’d know it doesn’t work like that. Welcome to the real world!
In the last couple of days, we’ve seen a 4%+ move up overnight in oil and there’s been a lot of buzz recently about Energy stocks.
While there are tons of opportunities here, there’s also the real risk of losing money if you don’t play your cards right.
Example: despite my recent gain with GFAI…
I’ve missed several nice exits too! You can check out my portfolio to see both good and bad sides.
FOMO trades also hold a hint of envy. You know when you see other people succeeding, and we have a natural urge to join in — even if it seems risky.
This emotion usually sets in when a stock is making a big move and you feel like you missed it. A typical reaction would then be to chase an entry based on your emotions (which is a terrible idea).
Chances are the stock’s price will actually reverse or retrace…and you might end up on the wrong side.
How Do You Fight It?
Have A Clear Reason for Entering a Trade
The times I used to let FOMO get the best of me, I’d make excuses to justify me ignoring my analysis and blindly following the crowd.
Whenever you feel like you’re going down the wrong path, a simple exercise to stay on track is to remind yourself WHY you’re about to take action.
This will help you immediately know if you have a clear and valid reasoning behind a trade or if you’re just bullshitting.
Can you answer honestly…
- Are you in it because it’s trending on social media?
- Did you get in just because a Reddit or YouTube “guru” said it’s the next big thing?
- Are you really sure of what you’re doing, and do you have a plan?
If these questions make you feel uncomfortable, then chances are you’re trading out of FOMO and you should jump out.
Discipline And Relying On Your Analysis
Stop paying attention to that voice that is hell-bent on convincing you to jump while you can and catch a quick move.
That won’t work.
What will help you instead, is your analysis of the trade, using indicators to spot opportunities, and applying a strategy you’ve learned.
You’ll get to save yourself a lot of stress and money.
What’s Holding You Back?
Last Sunday, I shared a list of 18 hot penny stocks I had on my radar this week. Most of these are a combination of Biotechnology, Energy, and some Beverage stocks
BTBT, AHI, VINE, SIEN, NNDM, VUZI, and CDZI for swings.
Momentum stocks like BCEL, INDO, IMPP, VEON, REDU, and MVIS. As well as BON, WBEV, BJDX, GFAI, and LQMT.
I did make something out of these…remember the GFAI I mentioned earlier?
What about you?
Did you take action and trade some of these? Let me know in the comment box below.