What is the FOMO effect? 8 ways to avoid FOMO
As in any financial investment market, FOMO is a psychological effect that causes people to act on instinct. So what is the effect of FOMO? What are the implications for investors and how to avoid them? Let’s find out something about this problem in this article.
What is FOMO?
FOMO stands for Fear Of Missing Out. Before explaining FOMO, you can take a look at the following examples:
Let’s say you are a new investor entering the market. As always, join a signal group to look for opportunities. You see a lot of people talking about a coin or asset and the price keeps going up. After observing the price for a while, you finally decided to invest in it. One day the price suddenly drops and then you realize that you have invested but you don’t understand anything. This is the FOMO effect in coin investment.
From the example above, we can understand FOMO as a kind of psychology of human emotion. When we get into a FOMO state, we will always feel sorry for ourselves if we don’t take action. We are currently imagining the wonderful scenarios that could happen in the future if we take this step. These thoughts blind us and make us make bad decisions.
What Causes the FOMO Effect?
Here are some ways to create a FOMO effect. Special:
High market volatility
It’s true, because when the market changes, we feel FOMO. In 2017, when bitcoin jumped to $20,000, many people felt sorry for not buying bitcoins earlier. For example, in 2015, 1 BTC was only worth $200. It never occurred to us that in May 2010 we would be charged 10,000 BTC for two pizzas.
Current winning or losing streak
If you always win in cryptocurrency transactions, you are afraid of losing at every opportunity. On the other hand, even if you fail, there is always a chance to win back what you lost.
Not only in the cryptocurrency market, but also in traditional financial markets in general, these rumors also cause a FOMO effect. For example, with rumors that every country in the world is banning bitcoin, many people will rush to sell it.
Social network influence
Social media is a double-edged sword. This is a place to get information, but it is also a source of information chaos. With the power of the masses, it can be easily swept away at any time.
Do you suffer from FOMO?
Let’s see if there is a point during the transaction when we come across this example:
Trading according to crowd psychology
Crowds sometimes have an invisible power. If you join the crowd, you will find a lot of people interested and investing in a particular coin. At this point you would definitely think that this coin must have something worthwhile to buy. Or they may know some “secret” associated with the coin, and these secrets may help increase its price in the future. There’s nothing wrong with the crowd-buying mentality, so follow the crowd.
When it comes to altcoins, you are told that investing in any coin can easily double your account. Or if a trend towards DeFi emerges, do you think any coin that DeFi owns can make huge profits without understanding the nature of the coin? It has to be FOMO.
Dare to try your luck
You are new to the cryptocurrency market and don’t have much knowledge about it. You feel the heat of the market and you want to explore it to make money. At this point, you run the risk of trying to see if you are lucky or not.
You follow the coin for a while and see its price keep increasing every day. You often hear about the price increase. At this point you think that you will regret not buying it earlier because the price will continue to increase. So be brave and wait for your luck from here. This is also called FOMO.
When you suffer from the FOMO effect, you experience the following problems:
Buy high, sell low
FOMO usually occurs during the peak of a bullish coin movement. This means that your registration is not guaranteed to be valid at this time. If you don’t have knowledge of the market and emotional investing, profits will not be optimal.
The FOMO effect will create a circle for investors. When you see prices continue to rise, there is a sense of joy mixed with regret. And today’s action is buying at the peak of the cycle. When prices show signs of falling, they show signs of fear. At this point, psychology will “sell the young rice” or sell when the price falls to the bottom of the cycle.
Loss of confidence in the market
When you lose so many “trains” of income. You enter when the price is high and sell when the price drops. You missed the market trend. You keep losing, and those losses make you even more skeptical of the market potential. When you lose all your money, you end up thinking that the market is a scam without knowing that FOMO makes you make bad decisions.
How to overcome the FOMO effect
If you also suffer from FOMO, try these 8 methods.
Change FOMO to JOMO
JOMO stands for Joy Of Missing Out. This means that you are used to winning and losing when investing. The opportunities are good for everyone. You don’t need to be afraid and sorry because you might miss a great opportunity. Instead, study and research the market closely to find new opportunities.
find the details
Don’t follow the crowd. You should enjoy crowd information for reference, it will be better. Then carefully study the index and market fluctuations to make the right investment decisions. Careful study of indicators can also help you discover which projects are scams!
Do you have a specific trading strategy?
Create an investment strategy that suits you. Be honest and respect this approach. Suggestions from others should be used for reference only.
Review the mistakes you made because of FOMO
Neither of us can guarantee that we haven’t experienced the FOMO effect. However, along with your regular records of your transaction history as above, this is valuable data to help you analyze your mistakes. Maybe you’re okay with mass psychology this time, or you’ve heard rumors. That’s okay, see it as a good “opportunity” to analyze and reflect on your mistakes.
Eliminate the emotional element in trading
New investors often let their emotions influence their investment decisions. This is similar to your decision to “sell young rice” when prices are showing signs of falling. So make trades only after you have analyzed them well using the numbers.
Read only trusted sources
When it comes to investing, news is one of the most important elements. But know how to choose an official source of information. Accessing messages from members of the project development team itself may be the safest way for you. You can subscribe to their newsletter for updates. Or follow them on social networking sites like Facebook/Twitter/Telegram…
Stay away from social media
Don’t join social media groups, especially reporting groups. Crowds often hurt you more than they help you. When you become part of the crowd, you will inevitably get caught in the crowd.
Find case studies on losing money due to FOMO
Do you remember Bitconnect? They fool many investors just out of greed. The script is very simple and easy to see.
They pump money to increase the BCC exchange rate. At this point, investors saw a steady rise in the exchange rate, buyers bought Bitconnect and immediately made a profit. FOMO out, they don’t want to miss the “Bitconnect train”. And many investors have poured money into it without realizing it. And you will see what the result is.
In this article, we explain what FOMO is and what its effects are.
For cryptocurrency investors, the FOMO effect always has a negative impact on investment decisions. This makes them impatient, loses patience, which makes it easier for them to make wrong decisions and of course these mistakes have to be paid for with money.
Finally, you must learn to arm yourself with the knowledge to avoid FOMO.
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