FOMO, crypto investor’s worst enemy – 10 rules to better fight it

FOMO, crypto investor’s worst enemy – 10 rules to better fight it

FOMO is one of the many phenomena that investors and traders of all kinds regularly face, whether bitcoins and other cryptocurrencies, as much as in more traditional investing. In a few years, however, this term has taken on its full meaning with the rise of cryptos and the massive arrival of a new wave of investors. Overview of a syndrome that is as well known as it is poorly controlled.

What is FOMO?

the FOMO is the acronym of « Fear of Missing Out », to know the fear, anguish tested at the idea of miss an opportunity, to miss something.

This phenomenon, which was identified many years ago, owes its real development to the advent of the Internet and social networks. Access to information is increased tenfold, giving us the possibility to know everything at any time.

This is obviously not without consequences: our mind finds it difficult to cope with all the demands with which it is confronted. Our judgment skills are impaired and our frustration is constantly tested.

While many aspects of our lives today are affected by FOMO, the latter takes on particular meaning when we are interested in investment and trading de cryptomonnaies. Who has never, for example, watched the course of a altcoin, waited before investing, noticed an increase of 10% and regretted this missed opportunity?

There are many reasons for this close link between FOMO and the cryptocurrency market:

  • The price of cryptocurrencies has exploded in recent years.
  • The ecosystem is in full growth and new trends are constantly emerging.
  • The success stories and others gains records are commonplace on the Internet.
  • Many inexperienced investors discover trading thanks to cryptocurrencies.
  • The first gateways to the sector are the social networks and their influencers.

Thus, overwhelmed with information and ever-increasing requests, cryptocurrency enthusiasts are constantly in regret and feel that they are missing out on a golden opportunity, investment or potentially lucrative trade.

A phenomenon that can hide many dangers

Why protect yourself from FOMO?

Because of its intrinsic definition, you now understand that undergoing the FOMO undermines our mental health. But the real danger in investing and trading lies above all in the fact of succomber to FOMO.

Succumbing to FOMO means putting yourself in danger by basing your investments on the basis of your sentiments, of yours temptations. It is abandoning all thinking and strategy in favor of primary emotions most often irrational and misleading. It is acting by trusting you to these sentences which constantly resonate in your head: “I could have won more”, “I knew that it was going to continue to rise”, “this time I feel it well”.

These emotions are however the worst enemies of the investor and the trader. They make it impossible for you to take the minimum precautions to ensure that your investment presents a positive gain expectation.

Many examples illustrate this type of behavior and its consequences :

  • While you have defined an entry zone on a cryptocurrency, its price keeps on going to increase. After a 50% hike, you end up investing for fear of missing out on the opportunity of your life. Unfortunately, this cryptocurrency is falling and you sell at a loss.
  • After a few bad trades, you invest all the rest of your savings in a project promoted by your favorite influencer without doing your own research. Unfortunately it was a scam and you lose everything.
  • After hearing about incredible gains on the new trend, Play to Earn, you decide to invest in the current project. Unfortunately, the latter was very largely overvalued and you collect significant losses.

As you will have understood, cryptocurrency enthusiasts most often succumb to FOMO in response to a mass Effect. Beyond the fact that the masses … are most often the loser, it is this crowd psychology which causes irrational market movements, often at the origin of speculative bubbles.

This is explained quite simply: we observe how others act to find the right behavior to adopt in a given situation. Some “influencers” have understood this well and use these notions to generate a feeling of FOMO with their communities.

We are therefore generally led to succumb to FOMO during the final phase of a bullish movement, that is to say when:

  • The rise becomes irrational.
  • The excitement is at its peak.
  • Forward-thinking investors take profits.
  • the risk / return on investment ratio is the worst.

Of course, it is possible to turn a profit after succumbing to the FOMO. However, and failing to improve your trading habits, it amounts to betting on a potential short-term gain against certain long-term losses.

FOMO and market cycles

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Learning to overcome FOMO is usually done in the pain and after having acquired experience necessary. 10 common sense principles can however allow you to pass between the stitches of the net:

Make a plan

This is probably the principle that encompasses all the others: do not try to reach the finish line without going through square one. And when it comes to investing and trading, square one is your strategy.

Choose a plan that suits you, that you can adjust and stick to. Do not give in to your primary instinct, set limits on allowable profits and losses and adhere to them.

Cultivate your risk management

Build a balanced portfolio, devote a small part of your portfolio to risky projects and limit leverage effects.

do not forget to take profit and don’t be greedier than your plan of action provides.

Do your own research (DYOR)

Inquire on the project before investing, understand the complexity of this market before it takes charge of making you understand it by force.

Don’t believe everything you read (even here): everyone who inspires you is already deceived, will be wrong again and perhaps you will be wrong.

Focus on the Dollar Cost Average (DCA)

the DCA is an investment strategy that involves investing a fixed amount in a cryptocurrency at regular intervals. Promote this type of strategy in order to smooth your entry price and of reduce the impact of volatility on your overall investment.

be patient

Do not rush, conduct your research on time and always give yourself time to think before you act.

Give the market time to allow you to achieve the objectives that you have set for yourself. Your purchase order has not been triggered? Regardless, there will always be other opportunities that tick all the boxes.

Take a step back

Take a step back on your investments, the evolution of prices and the ups and downs of your portfolio. The lack of perspective is one of the main reasons that will lead you to make hasty decisions such as giving in to FOMO.

Face your certainties

Deconstruct them mental models fed by social networks that distort your appreciation of reality. Despite appearances, not everyone is a winner from an investment in cryptocurrency. Many lose, make mistakes, experience failures and never talk about it.

Learn to accept

Learn how to accept your failures, the lack of time to devote to your research, the missed opportunities… You are not and will never be in all the right places.

Don’t stay isolated

Surround yourself with people who feel the same way as you, compare your opinions and share your difficulties in order to overcome them together.

Be careful, however, to respect the other principles in order not to give in to a group effect which could be harmful.

Cleverly follow the trend

It may seem paradoxical, but if you have followed the previous advice, the collective FOMO phases represent, for the informed investor, a period synonymous with opportunity. Learn how to take advantage of it while maintaining your rigor.

As you will have understood, succumbing to FOMO will make you make the worst decisions. Fortunately, respecting a few principles should allow you to face the market with more serenity. In the meantime, you can also turn to stablecoins and their many strengths.

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