“Damn, again I missed out a good position… and I’ve been waiting for it so long”. Did it happen to you? And what did you do? Did you chase the position despite everything to open it? And maybe the next time you decide to anticipate the move in order to be in the position that gives us chance of success. We call it: fear of missing out (FOMO).
Today I will focus on this issue, with which beginner traders have a big problem and those who don’t have until the end (clearly and specifically) assumptions and rules in trading. And in my opinion that’s the key to not one-time profits, but stable in the long term.
Fear of missing out – FOMO
Fear of missing out… in such a way this problem is described in the USA by traders. Fear of the fact that you will miss potentially good position. “Potentially” it is a key word in this case. Potentially everyone can be a trader. But isn’t. Potentially as well you traded on demo account, you should also earn on real account. But you don’t.
Example before 8 years
When I started in daytrading on the stock exchanges, it happened to expect for opening the position at determined price e.g. 29.99$ up to opening the short position. However, the rate for a long time couldn’t come to my prices; therefore I had a sudden impulse and decision to open short position earlier e.g. at the price of 29.84$.
Level actually not-having any meaning (because it didn’t previously constitute any level of support), so as well I could search for short at 29.84$ and by 29.87% or 29.74$. Each of these entries would be completely random.
What happened farther? I already have short at 29.84$, because rate for the last 2h ranged between 29.78-29.86$. My plan was to open a short only at the price of 29.99. Of course, after some time the rate increased up to 29.99$. I.e. level that I was interested. At some point I lost 15 cents on the position. Instead of only to open short, up to the strategy in which closing the position would be with possible loss of 1-5 cents (at the price of 30.00-30.05$), I had opened position at the price of 29.84$.
Because…:
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I wasn’t too patient.
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I didn’t believe in assumptions of my strategy.
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I was afraid that the rate wouldn’t reach the level assumed by me. And since the potential fall was great I decided to have a position already.
In case of described above transaction, as well as similar to it, I usually closed the position at the price of 30.00$ or little bit higher, i.e. on a level of loss 15-18 cents. Certainly, if I waited with entry on a level in which I was interested, the position wouldn’t be closed, because a condition of closing with stop loss wasn’t met.
What happened farther? Very common scheme! I closed the position at 30.02$ for example. And the rate didn’t increase higher, and after a while there was recorded decline much below 29.84$ where I had entry. I pissed off, recorded loss, but the rate headed in a direction which I picked. Nothing but only frustration!
It happened to me not once, not twice. A lot of times, I repeated the same mistake. Until finally I cut it once and for all (well, as they say it can happen one on the Russian year ;)).
It was an effect of clean calculation. Instead of cutting the position out with from 1-5 cent loss, my anticipation of move changed the level of cut losses at least repeatedly. That’s a lot. Too much as for surgical plan to cut losses!
Be cognizant what the problem is
This in my opinion is the key if we want, generally speaking, to go farther in the subject.
Firstly – how sure you are of your own strategy?
This problem usually affects persons, who play a bit randomly. Sad, but it’s true, because I often hear similar words from persons, who just begin on the market and have a considerable problem with understanding that the market dictates the conditions, rather than contrary.
Secondly – you don’t have to have a perfect entry
As in my example; 29.99$ was a level assumed for opening short, but just as well if the rate didn’t increased above previously described consolidation 29.77-29.86$ I could wait for opening short if the price dropped below 29.77$, which would be a good increase from consolidation.
That what I just wrote is prepared scenarios up to different playing the rate. Not always one level must be carried out. Sometimes it is worthwhile to have a few potential scenarios up to trading. I do it, if I have a good reason.
Thirdly – what directs you, that you open the position too early?
Recently I talked about it with my friend from the office. He said that has this problem – often wants to enter too early. And in spite of the fact that he knows that enters too early, isn’t able to cut this problem in his trading.
In my opinion, the solution is simple. Whenever this happens – on the sheet place a dot! Beside, how far from planned price you opened the position, what happened next. And the most important – how much you lost on it. If you will see in black and white what the numbers are – certainly it will cut out this problem.
What is your FOMO?
I would like you a little bit reflectively to look at your problems in trading. Fear of missing out, not has to refer only to the fact that you will miss a position.
If we will look at it more widely – FOMO may also appear in other moments of your trading. It will be great, if thanks to this article you will be able to diagnose wherever you have some a problem.
I can see among my friends that some traders have a really considerable problem with taking off from trading. Particularly, when they have worse days on the market and simply for yourself and your own health – it would be well if they rested and gained distance. It’s their FOMO – fear of the fact that when you won’t trade on the market, something unusual will appear or the day in which they will go on holidays, would just be a day when the card on the market will turn.
I did my FOMO workshop – and made some changes in trading. You can read about that in this article – Changes in day trading strategies.
Are you missing constantly good entries?
There is another possibility. You don’t forestall the move, but you constantly miss planned entries. In such a case the problem may reside in the fact that lack of concentration appears in the session.
Maybe your FOMO – is the entire pile of distractions. All the time you check your e-mail, cell, Facebook, etc. Because somebody just wants something important from you and you must be available. In such a case – my question is on what place you put trading? That is for you a way for living, earning, etc.
The best trading strategies and fear of not-earning – my FOMO
Looking how my trading changed over the years, one fact stands out firmly in front of my eyes. I have always generated the best profits when several criteria were fulfilled and when I traded chosen 2-3 systems. Yet I still used a few other strategies, particularly in periods when on the market there was little a low changeability and poor volume.
In my case it wasn’t – FOMO, fear of missing out the situation. It was something what I would call – fear of not-earning in the session 🙂 In my style of trading I got used to stable profits. When on the market was less activity, I sought good chances by force for earning. As a result sometimes I traded too much, too nervously. Somebody who is briefly on the market may think ‘what’s a problem, since you still earn’.
Believe me, it’s a different point of view when we are on the market for many years. Being on the market as very active trader, someday you will feel tired.
My trading evaluates, because alone I want that. Currently I changed assumptions in order as much as possible to use sessions which have above average potential (meet my criteria let’s call it “good market”). It teaches me that not every session must give signal for trading. Strong reduction of played by me strategies enables me far more calmly to trade and much better to use these signals, which have a greater potential of profit.
I diagnosed my FOMO. And I work very hard to develop in my direction (about which I wrote a lot at the end of 2015 and beginning of 2016). And what about you? Share with me your FOMO 🙂
