FOMO in Crypto Trading

Wisebitcoin 2021-04-30

crypto fomo banner

FOMO, or Fear of Missing Out, is an acronym that seems to explain the investments many people make in the crypto market. As the name suggests, it is the fear or irritation that one feels on missing out on anything that others might be enjoying. In the context of trading, this could be gains or an opportunity to earn more.

FOMO haunts newcomers the most, triggering them to place large investments after a drastic increase in the market value. This type of behavior goes against common trading wisdom that argues just the opposite, as professional crypto traders try to buy at the end of a dip.

Like in any other market, FOMO is one of the factors that influence crypto trading and can have a massive impact. Let’s see how it is relevant and how to avoid it.


How Does FOMO Relate to the Crypto Market?

When it comes to the cryptocurrency market, FOMO is widespread due to the massive and sudden gains seen in digital currencies like Bitcoin, Ethereum, and others. As more people become aware of these immense opportunities, more people fear missing out on them. 


When people think that a specific cryptocurrency has the potential to let them win big, they start buying it in large numbers. As many investors and traders believe blockchain and cryptocurrency are in their infancy stage and have a huge potential for growth, FOMO seems to be more than just a factor and likely a driving force in the market. 


On the other hand, FOMO also helps create value because it encourages traders and investors to try their hands on various cryptocurrencies. It is fueling massive investments in multiple sectors of the space, such as DeFi and NFTs, which indicates the value of the crypto market will continue to grow because the money is being used for productive use cases. 


However, with so many traders flooding into the crypto market, the biggest risk factor associated with FOMO is that it may skyrocket to unnatural rates and lead to a pullback once the FOMO passes.


Know If You Are a FOMO Trader

You could be a FOMO trader if you often feel or act this way:

  • You get influenced when everyone else buys the coins
  • You may make an irrational decision without proper analysis
  • You continuously brood about missed opportunities on cryptocurrencies that have grown recently.


How to Avoid FOMO?

There are some ways to keep your head clear and combat trading mistakes like FOMO.


  1. Stick to the Fundamentals

The very first thing you can do is to stick to the fundamentals and charts. This means analyzing the value behind the asset rationally by identifying its strengths as well as its potential downsides. Then, plan ahead and once you arrive at a decision stick to your trading strategy.


  1. Consider FUD Earlier

The next thing you must do is to notice FUD early and react accordingly. FUD is another popular acronym, short for Fear, Uncertainty, and Doubt. It refers to the emotions that spread due to bad news on social media and other avenues. It is not based on fundamentals or charts. If you think, however, that this will affect the price of a specific cryptocurrency, set your stop. Prepare yourself to buy those in another dip that could happen shortly.


  1. Study the Times When You or Other People Lost

FOMO relates directly to rash decisions that you make. Remember the last time you fell prey to FOMO and failed. Consider it as a wake-up call and start exploring the cases where people sustained big losses. Join a trading community and ask about their experiences, encouraging them to share their failures. Try to analyze the root cause and use that wisdom when you are about to trade.


  1. Use Charting Software

Finally, take the help of charting software, quotes in real-time, news feeds, and premium analysis that come bundled up with trading platforms. One such platform is Wisebitcoin. Its intuitive user interface, technical indicators, and customizable trading scripts help educate traders about the crypto market and prevent them from falling prey to FOMO.

Put your trading skills to test with Wisebitcoin. Start with us today!