FOMO NOMO

Note: When it comes to performance FOMO is a significant problem in trading, and much less so in golf, poker, and eSports, so the below post is written primarily for traders. That said, FOMO may show up in other parts of your life and the advice at the bottom is universal. 

 

I hate the term FOMO. It’s so overused that traders just think it is inevitable. It’s an umbrella term that is so broad it loses meaning. Plus, because it’s so commonly discussed, it can almost seem semi-cool to fall victim to it, like loss porn on Reddit. 

But what I really hate the most is that chalking up a bad decision to FOMO stops you from actively improving your decision-making process, with costly consequences. 

Making good decisions is the cornerstone of performing well and the opposite of FOMO. To make sound decisions you must understand that hindsight is easy, and foresight is incredibly hard. You won’t always know the right time to buy or sell. Even the best traders in the world can’t do that. But while it is obviously unrealistic to think that you can capitalize on every opportunity, FOMO is still a powerful force.

What many of you don’t realize is how often emotions are actually driving the impulsive decisions you label FOMO. Getting clearer on what FOMO is really about can help you identify the hidden emotions affecting you. In this way, FOMO provides an interesting opportunity to deepen your mental game.

 

What FOMO Is Really About

When we start to analyze what FOMO is really about, some of you, of course, are genuinely worried that you will miss out on a big move. But the real issue is what missing out means to you. 

The only pure version of FOMO I’ve found is driven by the assumption that there will not be another opportunity. And while that is obviously false when you’re in the right state of mind, the presence of FOMO is evidence that a part of you must believe there will not be another opportunity.

Beyond that, what is labeled FOMO really isn’t about the fear of missing out, there are other elements to it.

Think about it for yourself. What would it mean if you missed out on a big move or the only quality set up on the day?

Perhaps missing out could feel like losing and you hate losing. FOMO might show up because you lack confidence and your immediate jump into the market when it starts ripping is an attempt to avoid feeling stupid or embarrassed that you missed out. 

Or maybe missing out would be proof that you’re not perfect when you struggle with perfectionism. Perhaps you’re not happy in your life/job and you’re looking for that one big trade as your ticket to freedom. Maybe seeing others make money while you aren’t sparks a fear of failure, leading you to think that you’re not good enough. Or because you consider missing out to be a mistake and fear mistakes, you could be trying to avoid the intense self-criticism that comes after you miss a big move. 

FOMO can also be driven by an angry need to make back losses. Or maybe the only reason you are in this game is to make a ton of money and FOMO is really just greed compelling you to gamble.

By the way, sometimes FOMO isn’t an emotional problem, it’s a technical one. For example, if you feel like you’re always chasing the market it could be because you’re lacking the requisite skill as an investor/trader to recognize quality opportunities. There’s always going to be someone making money, or minimizing losses, and if you’re serious about being in that camp, rather than someone who simply rides the wave of the market, you need to take seriously the need to develop your strategy and skill set. 

In The Mental Game of Trading I shared the story of my client Carlos, who had a legitimate sense of missing out because he couldn’t get a good understanding of where the market was within his range to time his entries properly. By utilizing the Mental Hand History, talking and thinking through what was happening, he realized that FOMO was a legitimate fear highlighting a gap in his execution.

Be sure to rule out something on the technical/strategic side, and then you’ll know whether you need to focus on the mental and emotional side to truly solve your problem with FOMO.

 

Preventing FOMO

Just as there is more than one underlying cause for FOMO, there is more than one way to prevent it. That starts with making sure you see it coming. 

What signals might indicate you’re experiencing FOMO? Maybe you can’t stay focused on the sectors, symbols, or markets you usually watch. You feel like big moves are happening elsewhere. Adrenaline pumps through your body, you’re hyper-focused, and driven to avoid missing another big opportunity. You missed the last one, and the urge to get it right this time is overpowering. You know you shouldn’t chase, but you worry that price isn’t going to come back down and that you have to get in now. Or maybe you overreact to breaking news. You have a panicky feeling and make a rash decision without completing your analysis. You get stopped out, and as it immediately retraces, you convince yourself that it’s fine to get in again because it “feels right.”

Either way, it’s critical that you become aware of the escalation. Start mapping your FOMO, paying close attention both to what triggers the emotion and to what signals an increase in it. That will help you get to the bottom of what’s driving it.

Hidden emotions or impulses like this cause you to alter your thoughts, shortcut your process, or take on too much risk. To counter them, you need to pay attention, ask questions, and do some tracking. I have a free tool that can help, that I call a Data Collection Worksheet.

If you’re not sure why FOMO is affecting you, start by collecting data around each decision you make so you can look for patterns and identify what is driving your decisions (if you know when FOMO shows up, you can collect the data just on those decision points). Here’s an example of what I mean:

Use the data you found to better understand what FOMO is really about for you. Bear in mind it could be related to any of the underlying flaws outlined in The Mental Game of Trading, including the ones I mentioned above. It’s also important to collect data after you really do miss out on an opportunity. How do you feel at that point? Is it different than when you just think you might miss out?

FOMO is a big reason why traders make poor decisions. Using this data collection tool consistently will help you uncover the faulty patterns in your decision making and allow you to be more aware when you’re about to make a poor decision so you can change course. 

If collecting the data doesn’t lead to new insights, however, try these other tactics I explained in The Mental Game of Trading:

  • This one might sound strange at first, but force yourself to stay on the sidelines to intensify your emotions. The reason to do this is that when your emotions are more intense the cause of them can be easier to identify. How might this look in practice? Define a narrower set of criteria for what trades you’ll take; for example, by only taking A+ trades for a day, few days, or a week. 
  • Or you might deliberately remove some discretionary-type trades that can lead to FOMO. Keep a notepad or journal open next to you and, in real time, capture the emotions and thoughts that arise. They will be the clues to help you complete a more precise map, laying the groundwork for you to determine the roots of your FOMO and come up with a correction. If you find yourself hesitating about the financial impact of this exercise, remember this is research. You’re investing in a long-term upgrade to your execution that, if successful, will likely recoup those short-term missed opportunities many times over. 

FOMO may be a common problem, but it doesn’t have to derail you. Do the work to dig out what is driving the fear and then use my system to correct the underlying emotional problems. Before you know it, you’ll be FOMO NOMO!

Written by Jared Tendler

March 11, 2024

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