How to avoid trader’s traps: FOMO and FUD
Traders make more critical mistakes when they are in an unstable psychological state. FOMO and FUD are the most common factors that cause traders to take the wrong positions.
FOMO and FUD usually go together. More specifically, FUD manipulation works best with an audience already FOMO-influenced. How to avoid making bad decisions if you are sucked into the funnel of instability?
How is FUD different from FOMO?
We have already described in our article what FUD is and given several examples of how it works in the crypto market. Let's focus on FOMO, but first, we need to refresh our memory.
FOMO (fear of missing out or “lost profit syndrome”) is the fear of missing out on a unique opportunity due to inactivity that can quickly change life in a positive direction. This attitude is associated with the person’s internal psychological settings.
FUD (Fear, Uncertainty, and Doubt) is an external psychological manipulation to sow uncertainty, panic, confusion, and a desire to act hastily in a specific group. Moreover, the manipulation is built in such a way that the target audience's actions bring profit to the manipulator. FUD often uses a narrowly targeted information attack to get readers/viewers to take the desired action.
A concentrated FOMO idea for a trader might look like this: “If I'm always afraid to put buckets out, then everyone will earn money on Lambo, and I, like a fool, will ride on my father's old Chevy.”
And FUD manipulation, in this case, would sound like this: “Analysts of the leading blockchain company Alice & BasilioInvest claim that the ABC coin has already reached the bottom and a bullish spurt will soon follow.” At the same time, the main thing is not that the information is false (it can be true!) but how it is presented. You hint that the price will go up soon. Meaning that whoever is late will miss the party, grabbing the coin at a higher price. In this case, the manipulation will have a great effect, and the trader is 100% likely to invest in the ABC shitcoin.
What is FOMO
FOMO is the other side of perfectionism. Its roots are well-fertilized by the obsessive fear of being inferior to others. It happens to people if their mothers compared them in childhood with more successful classmates or friends' children.
In trading, this means being less fortunate than others, earning less, losing more, not having a personal break-even trading strategy, closing trades without getting the maximum profit, etc. The fear of missing out leads to the trader succumbing to the herd instinct and mindlessly following the crowd to avoid being left behind by the winners.
This is when the trader becomes easy prey for FUD communicators since it is way easier to get rash actions from him if you hint that they will lead to success. A person with FOMO syndrome is more responsive to PNL indicators of telegram channels than to their common sense. His main thing is not to be left behind while the rest are marching to success. And if someone from your acquaintances is moving towards success, then the “max-fear” state is guaranteed.
How to deal with FOMO
There are a few simple rules that you should follow if the thought of your failure has settled in your head:
1. Don't try to do everything at once. Focus on 2-3 working sources of information and a proven trading strategy. You should not consume information like fast food if you have a weak nervous system. It will lead to your attention’s frustration. You will no longer distinguish accurate information from false.
2. Be less interested in the success of others, and focus on your achievements, even if they are small. Constant curiosity is like when you start scratching a mosquito bite and can't stop.
3. See competition as a growth stimulus, not a potential failure. In the end, even if you are biting dust today, it doesn’t mean that the situation won’t change tomorrow. The crypto market is a game without rules.
4. If it has become challenging to make decisions in a situation you have already lost in previously, then this is the FOMO influence. Trust your experience, not the unknown analysts’ advice.
And to finish off, non-obvious but effective rule – take a breather when you feel you can’t catch up with those ahead. Close the trading day and do something pleasant. You can pet a cat, for example, it does not have the FOMO effect.
The content on The Coinomist is for informational purposes only and should not be interpreted as financial advice. While we strive to provide accurate and up-to-date information, we do not guarantee the accuracy, completeness, or reliability of any content. Neither we accept liability for any errors or omissions in the information provided or for any financial losses incurred as a result of relying on this information. Actions based on this content are at your own risk. Always do your own research and consult a professional. See our Terms, Privacy Policy, and Disclaimers for more details.
Articles by this author
