The fear of missing out (Fear of Missing Out, FOMO) is a psychological state in which an investor experiences anxiety because of the fear of missing a potentially profitable opportunity. In the cryptocurrency context, FOMO most often manifests itself during the rapid rise of some asset: watching the price movement and the activity of other participants, a person makes a hasty decision to buy, afraid of being left out.
The danger of FOMO is that it replaces rational analysis with emotions. Purchases made in the heat of the hype are often made near local highs, when the main rise has already taken place. The effect is amplified by social networks, themed chats and the news background, which create the feeling that "everyone around has already made money".
How to reduce the impact of FOMO
- Define your strategy and entry points in advance, rather than reacting to sharp movements;
- Rely on your own research of the project, rather than on someone else's hype;
- Manage the size of the position and the acceptable risk;
- Take a pause before an impulsive trade and double-check your motivation.
Understanding the nature of FOMO helps market participants act more deliberately. Discipline and a plan built in advance reduce the likelihood of emotional decisions, which often turn out to be the cause of excessive risks.
