FOMO stands for Fear of Missing Out. Emotional traders often chase a runaway train in the markets, only to be disappointed by a significant correction in price to the downside. I mean who can blame them, right? For maybe the third consecutive day or even weeks, they have seen price blast through previous price levels. This time they won’t miss the boat as they rush into the market, boldly declaring they have arrived and demanding that the market continues breaking barriers to the upside.
Every trading day, there is a battle between the bulls and the bears. The market doesn’t care who the winner is. For this reason, every trader should understand the psychology of the market. They should have a plan with defined rules. When traders blindly enter markets, the root cause is typically because they have no plan.
We have heard plenty of stories about FOMO, but how many times have you heard of FOGI, the Fear of Getting In? You see, this emotional blockage is just as damaging. Paralysis by analysis overtakes your mental processing, meaning that your excessive thoughts pull you deeper into the sea of no action. FOGI creates imaginary scenarios that keep you from participating in the market. This is often married with confirmation bias. You arrive every day to the market looking for evidence to support your fear, making statements such as, “See, I knew I was right in not investing. The price of that crypto is going down.” At the same time, hundreds of other assets may have performed well that same day. However, our mind blocks anything that contradicts our biases.
Investing or trading isn’t about knowing what will be profitable or not. It’s about understanding who you are at your core. The markets are always right. As humans, we aren’t. One could argue that if the markets consist of people, then how could the markets always be right if humans aren’t? The markets are always right because they shows us in real time what people value or don’t. If the consensus of a stock or crypto is overwhelmingly deemed a sell, then the market will tell us what we need to know. It’s not about what we think. It’s about what we know.
For example, we know Bitcoin has a limited supply. This tells us that the price of Bitcoin will be exponential in the future due to supply and demand laws. We receive confirmation every time it breaks a record high. We don’t have to guess nor chase anything when we have properly done our research and possess a solid plan.
If you have FOGI, take inventory of what’s truly holding you back from seeking financial freedom.