September 12

How To Beat FOMO

By Yvan


In this short post, I’d like to talk about FOMO, an acronym for fear of missing out. What are the physical and psychological implications of FOMO? And how can you think clearly in the very midst of it?

To answer these questions, we must first look at what emotions are.

In truth, experts have a hard time reaching any kind of consensus. But most agree on three things:

1. The middle layer of the brain, called the “Midbrain”, is where emotions originate.

2. A complex series of physical changes throughout the body is at the core of any emotion.

3. These physical changes condition/prepare us to take action.

In our subjective experience, we experience emotions in different ways–“butterflies” in the stomach, a “lump” in the throat, shaky hands and knees, difficulty to breathe, restless energy throughout the entire body, racing thoughts…

We also notice emotions as urges to act in a particular way–cry, laugh, hide, fight, and so on.

In trading, when you’re under the influence of FOMO, you commonly tend to override your trading plan by making changes to your trades, increasing your risk, entering before you get a signal, not getting out when your price target is reached, etc.

But notice the keyword here: tend.

A tendency means that we are inclined to do something; but it doesn’t mean that we have to do it. It doesn’t mean we have no choice.

It’s very important that you understand this…

Let’s say, you’re anxious about missing out on a trade. You will certainly have the tendency to do certain things that you wouldn’t do normally. But no matter how hard-hitting the emotions are and compelling the thought is, you can choose to stick with your trading plan and your longer-term objectives.

The experience of FOMO certainly varies from person to person (as does any emotion), but once again, no matter how strong the symptoms are for you, they certainly do not control your behavior. 

Here’s a simple example to illustrate why…

Have you ever felt angry but acted calmly?

I’m sure you have. Even though you felt like bursting out, you actually managed to speak slowly and calmly while maintaining a look of serenity on your face.

What prevented you from acting out your anger?

Try to recall…

The answer: it’s your will, isn’t it? It’s just that! You can find many other reasons but inherently, it’s all just that.

In other words, you had a tendency to be angry, but you chose not to be.

Here’s the point I’m trying to hammer home: At the end of the day, what you value matters more than how you feel in the moment.

If you value your relationship with your partner more than your ego, you will do everything to protect that relationship.

If you value your health more than some fleeting short-term pleasure, you will find a way to stop smoking or reduce the number of cigarettes you smoke per day.

If you value consistency in trading more than your emotions, you will do what you know you should do; you will stick with your trading plan.

Understand what you value and you’ll have a better understanding of why you behave the way you do. You’ll also have an easier time sticking with what you value.

Even though you can’t really control your emotions and the way you feel, you can directly control your behavior. What you value determines, to a large extent, how you behave, regardless of what your tendency is.

This realization has an important practical application for you as a trader because once understood, you’ll understand that it’s far more useful to focus on that which you can control rather than that which you can’t.

The idea that emotions control your actions is widely accepted as a fact and it’s a very powerful illusion. But it’s just that: an illusion. And it’s so anchored in our minds that it’s hard to believe otherwise.

Let’s get back to FOMO. When you’re in that state, just remember that even the best traders experience this. They really do, and probably as often as you do!

But, the difference is that, consciously or unconsciously, they’ve somehow managed to develop a will that is stronger than their FOMO.

That’s one.

Second, because they also know that their will is subject to changes (it depletes throughout the day), successful traders have a set of rules that takes most of the hard decisions out of their hands.

In other words, successful traders have learned to do what needs to be done instead of doing what’s easy. They don’t seek to do what’s easy at the moment to the detriment of their longer-term objectives.

It’s like going to the gym. It’s not easy but you still go… because you want the results.

Conclusion

It seems as if emotions like FOMO cause us to lose in the markets, but actually, it’s not true. We only lose because we’ve developed bad habits.

But if you can consciously bring your attention to how you’re feeling in the midst of FOMO, and if you can consciously observe how this is giving you the tendency to behave in a certain way, not the obligation, then you’ll still be able to control your actions. No matter how intense the emotions are.

Understand what you value and you’ll have an easier time staying consistent.

And this, ladies and gentlemen, is how you beat FOMO.

 

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Memorable Lines From This Post

A tendency means that we are inclined to do something; but it doesn’t mean that we have to do it. It doesn’t mean we have no choice.

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At the end of the day, what you value matters more than how you feel in the moment [...] If you value consistency in trading more than your emotions, [...] you will stick with your trading plan.

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Even though you can’t really control your emotions and the way you feel, you can directly control your behavior. What you value determines, to a large extent, how you behave.

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successful traders have learned to do what needs to be done instead of doing what’s easy. They don’t seek to do what’s easy at the moment to the detriment of their longer-term objectives.

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