Emotions play a critical role on Wall Street. Two extremely powerful emotions are fear and greed. FOMO, or the Fear Of Missing Out, impacts a lot of decisions people make both on and off Wall Street. Here are three ways successful investors avoid FOMO.
Plan Your Trades:
The first step successful investors take to combat FOMO is to create a trading plan. Trading plans come in all different shapes and sizes and it is important to find one that works well for you. I prefer to do the bulk of my work on the weekend when the market is closed. This helps me objectively analyze what happened in the prior week and plan ahead for the following week. Other people analyze the market in pre-market and then plan the day based on what’s happening. Others run screens in the middle of the day to look for stocks that are moving up or down on big volume. Again, there are many ways to create a plan. The key is to find one that works for you.
It is also important to keep in mind that most FOMO trades are not well thought out and tend to be impulsive. If you step back and create a plan that will help you reduce the amount of times you step into the market and make subpar trades that lead to FOMO and other common (and easily avoidable) mistakes.
Trade Your Plan:
The second step to combat FOMO is to trade your plan. This may sound very simple because it is simple. However, I can tell you from experience, it is not easy. Many things in life are simple but not easy to do in real-time. Think about losing weight, it is a simple formula of calories in vs calories out. Just about anyone can lose weight if they burn more calories than they consume. Sadly, most people are overweight. The same is true for trading. Creating a plan and trading the plan may sound simple but most people have a hard time doing it in real-time. To help, I created an entire coaching program designed to help people do everything mentioned in this article (and then some).
Accountability, Get A Buddy:
The third thing successful investors do to reduce FOMO trades is to create a buddy system or some form of accountability with their trading. Most people trade alone and do not have to be accountable to anyone other than themselves. There are pros and cons to that approach but if you look at just about every major hedge fund on the planet, the best traders are transparent and have a support system of some sort. Meaning, they do not trade alone. Yet most individual traders, trade alone. Having accountability is critical to helping investors get “out of their head” and an easy way to help people follow-through and actually follow their plan.
Bottom Line:
There are many guardrails people create to help reduce FOMO trades. The idea is to create a system that works for you and then step back (get out of your way) and trade that system.
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