How To Beat FOMO As A Forex Trader
Emotion is the devil when it comes to forex trading and it’s something that we blog about time and time again. Maintaining a cool, clear and level head is an absolute must at all times, whether you’re new to trading or have been doing it for years. Without this, you compromise your decision-making ability and, before you know it, you’ll start to see more losses than wins.
Of course, it’s all very well and good knowing that you need to keep your emotions in check, but how exactly do you go about doing this?
It’s certainly easier said than done, especially during intense and emotionally charged situations… if you’re facing a big win or if you’re on the verge of a big loss, your heart can very easily start to rule over your head and this will ultimately spell disaster sooner rather than later.
Getting to know yourself on a deeper level is absolutely key when it comes to trading and it’s essential that you’re honest with yourself about your emotional strengths and weaknesses, so you can direct your focus to the right places and really drive your progress as a trader.
One particular emotional trait that’s very common in people from all walks of life, not just professional traders, is FOMO – or the fear of missing out.
What is FOMO?
The exact definition of FOMO is feelings of anxiety that arise in the belief that something interesting or exciting is happening right now somewhere else. In the digital age, these feelings are often associated with posts seen on social media, showing other people having an amazing time doing something you’re not involved in.
From a trading perspective, this anxiety can refer to the fear of missing out on what you believe is an amazing opportunity. These feelings can be so strong that you suddenly find yourself tempted to stray away from your trading plan and previously devised strategies… which, as we all know, is one of the surest paths to ruin.
These FOMO feelings often manifest themselves particularly strongly when your trades start to register a significant rise in value over a short period of time. This can make it seem as though something very exciting is about to break and if you don’t capitalise immediately, then you’re going to miss out on a lucrative opportunity.
In this instance, it’s important to refocus and remember that logic and reasoning have their place in forex trading, but emotion should be parked at the door.
Remember that you devised your trading strategy when you were cool, calm and collected – and that you carried out detailed analysis of the markets to help you make the right decisions in any given set of circumstances.
However, FOMO can be a tricky beast and all sorts of other emotions tie in with it, which can make it very difficult to get a handle on. We’re talking greed, we’re talking impatience, we’re talking excitement, we’re talking jealousy… because it’s so nuanced and so complicated, you may find your FOMO takes over without you even noticing.
As such, being honest with yourself about the reasoning behind your trades can help you identify whether your head or your heart is in charge.
Ask yourself if you think you’ve adopted a herd mentality approach to trades. Or are you being lured in by the potential for making a lot of money? Or perhaps you believe other traders know something you don’t… any kind of thinking along these lines is no substitute for a strong and well thought out trading plan.
What triggers FOMO in trading?
Knowing what pitfalls to look out for is key if you know you’re susceptible to FOMO and want to do all you can to protect yourself and your trades.
There are lots of external factors at play that can trigger your FOMO. For example, market volatility has an awful lot to answer for and you may find yourself tempted to jump on a trade just because it’s trending, without taking into account the direction of market movement.
What’s going on in the outside world can also contribute greatly to FOMO. Of course, you need to pay close attention to global current affairs and economics news if you want to make it big as a trader, but this can also have negative effects if you let your FOMO take over.
The markets are easily affected by rumours, so make sure you can differentiate between fact and fiction – and that you follow your trading plan if you’re unsure.
And don’t forget about social media. As wonderful as it can be living and working in the digital age, social media platforms can be hugely influential over your trading so it’s important not to overindulge online if you can help it.
Yes, it’s great to read about success stories of other traders and, yes, this can really spur you on and help you see success of your own… but there is too much of a good thing and if you feel as though the time you’re spending online is having a detrimental impact on your trading, it might be time to step away from the smartphone for a while.
How to beat FOMO in forex trading
As with most things when you’re trading currency pairs, your successes and failures will largely hinge on how disciplined you are and how well you’re able to keep your emotions in check.
We’ve said it before and we’ll say it again, following your trading strategy and knowing it inside out should be your go-to for everything. This will help keep you on the straight and narrow, no matter what the markets do and it will allow you to keep a lid on your emotional trades, helping to increase your confidence as a trader at the same time.
Your general outlook regarding trading can also help you keep FOMO at bay. Acknowledging and accepting that there is no such thing as a perfect trade and that trading inevitably brings with it ups and downs, no matter how good your strategy is, will help you see that there will always be other opportunities, so it’s ok to let some of them go… no matter how amazing they appear at the time.
Something else that we’re strong advocates of is keeping a regular trading journal, which is a strategy employed by the most successful traders out there. This is one of the most effective ways of managing your performance, seeing where you’re doing well and where you may be falling down somewhat.
Journaling can help you see that FOMO isn’t all it’s cracked up to be and you should perhaps trust your own judgement more, even if your heart is trying to lead you up the garden path.
With all this being said, as much as it’s important not to be ruled by your emotions, it’s also just as important not to ignore them completely. You need to acknowledge your feelings so you can deal with them and move on, becoming a stronger trader for it in the long run.
It may be that you’re just not in the right frame of mind to trade and an experienced professional will know when it’s time to take a break, instead of just ploughing on and hoping for the best.
Forget FOMO, embrace JOMO!
Forex trading can be very addictive and, if you’re not careful, you may well find yourself glued to your computer screen more often than not, with nothing but the markets for company day in, day out.
Balance is important, no matter what it is you’re doing – and this is where the idea of JOMO can step in to save the day. JOMO – or the Joy Of Missing Out – is all about realising that it’s OK to step away from the trading floor, recharge your batteries, do something else… and that the markets will still be there when you come back.
What you don’t want to do is burn out. As a trader, this can prove disastrous and can see you make all sorts of ill-advised trades. But if you work with the idea of JOMO in the background, you’ll always be able to find time for other pleasures in life and this is sure to yield positive results when you do get back to the books feeling fully refreshed.
The trading world is a very fast-paced one indeed and this can really prove quite tumultuous on an emotional level, so having some coping mechanisms and strategies in place can help you build resilience and ensure you can continue trading in a positive way. So embrace the JOMO and beat the FOMO today!
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