How to avoid FOMO emotion in transaction

2022-08-08, 10:30

[TL;DR]

• Emotions are a usual response to the fluctuations in crypto markets, but letting the emotions have the best of you may cause you to lose your investment.

• FOMO is acting on impulse, which often arises from perceived opportunity that a trader does not want to let pass, therefore, deviating from plans.

• Some ways to avoid FOMO in transactions include setting investment goals and targets, keeping transaction journals, and adopting an investment strategy.

Emotions are a normal response to the ups and downs in the crypto market. Nonetheless, acting impulsively and giving in to emotions makes many investors lose their portfolios. Some natural emotions that affect people in the cause of crypto investment and transaction include fear, optimism, and panic. This disposition is not new in the financial market and has been popularly known since the traditional pre-crypto time as the fear of missing out (FOMO). FOMO arises from a mixture of fear, hope, and panic that drive people to buy assets.

What is FOMO?

FOMO is an acronym for Fear Of Missing Out. It is a situation whereby a trader acts on an emotional impulse, often based on fear and greed. This impulse may stem from a perceived opportunity that the trader or investor does not want to let pass, therefore, deviating from their plan. While a trader may achieve some successes trading in a FOMO manner, such successes are transient and not sustainable. Instead, the success achieved may lead to a more significant loss when the investor justifies his approach by it and continues transacting in that pattern.

The rise in popularity of the crypto market has attracted many people looking for ways to make profitable transactions in the market. The industry is famed for how people become rich with random investments.

For example, the value of BTC rose from around $0,008-$1 to over $20,000 within seven years. Many in the crypto community regret not buying BTC at the right time. As new coins appear on the market rapidly gaining momentum, those who do not have the time or skillsets to trade crypto tend to worry about missing out on the opportunity and therefore overwhelmed by FOMO. Existing traders also face the gut feeling of swapping coins and panic selling during the upswing or downswing of the crypto market. This FOMO emotion amidst high market volatility poses a massive problem for crypto traders because it often leads to bad decision-making regarding transactions and investments.

Symptoms of FOMO

Specific signals may indicate that your transactions are being influenced and driven by FOMO. Some of these symptoms include:

1. Deviating from a plan or making unplanned transactions:
You can rein in emotions in the crypto transaction by planning your transactions. The easiest way to know you have FOMO is by making an unplanned transaction. For example, buying a crypto asset out of impulse because the price is mobbing strongly after a news release, community, and social media hype, and you feel like you can profit.

2. Herd mentality:
Herd mentality is the tendency to buy crypto assets because people are talking about it. A crypto investor needs a temperament based on strategy and plan, and neither derives pleasure from being with or against the crowd. Those buying an asset because people are talking about it are often at risk. They may already be in too late. The crypto asset might have become overvalued and on the verge of being sold by more experienced traders. Hence, following the crowd is not the best investment strategy.

3. Playing down your criteria:
When you find yourself having the impulse to carry on with a transaction that does not meet your criteria because you don’t want to miss out, you may suffer from FOMO.

How to avoid FOMO emotion in transaction

The crypto space is filled with different individuals and players. While some genuinely strive to educate the masses, others promote their tokens and coins to generate higher prices. You have to be guided to avoid being easily swayed by the opinions of crypto traders and influencers on social media. The following points are crucial to avoid FOMO in crypto transactions and investments.

1. Set investment goals and targets
As a first step to avoiding FOMO emotion in crypto transactions, you have to determine your investment goals and targets. Set out your short, medium, and long-term goals in your investment plan. Identify the assets you want to keep long-term (e,g. BTC, ETH) and the ones you want to acquire as a short-term purchase (e,g, NFTs). You will also need to cultivate planning discipline so that rumors about an asset predicted to increase by 300 percent will not tempt you to deviate from your plan.

2. Keep a transaction journal:
To cultivate a planning discipline, you must track your transaction and see how well you keep to your investment goals and targets. You will notice the urge to take unplanned transactions in the first instance. Should you stick to your plan and keep journaling, you will notice these feelings fade with time.

3. Follow analysis from reliable sources
Information from unreliable sources is a significant promoter of FOMO in the crypto market. Many conversation groups and content creators discuss the crypto trade and investments daily. The use of clickbait and sensational headlines to overhype a project is now the order of the day. To avoid FOMO emotion in crypto transactions, you must read analysis from sources that explain various risks to the readers. Reliable sources convey information critically and neutrally, differentiating between FOMO emotion and balanced optimism.

4. Adopt a strategy such as Dollar-Cost Averaging (DCA)
Adopting an investment strategy to avoid FOMO emotion in crypto transactions is pertinent. One of such strategies is the Dollar-Cost Averaging technique. This strategy involves investing the same amount in small increments at a regular interval over a while. DCA can effectively check FOMO emotion because it operates by scheduling the investment process no matter the situation of prices and market trends.

5. Asset diversification:
One way to keep your cool and avoid FOMO emotion in a transaction is through asset diversification. Diversification helps to cushion the effects of loss. When the impact of loss is minimized and mitigated, it gives room for better investment decision-making.

Bottom line

FOMO emotion creates anxiety that clutters the mind of a crypto user in making a sound investment decision. It is a natural response to the upswings and downswings of the crypto markets. As thousands of projects are being launched in the industry, there is a tendency to feel people know what you don’t know. Always remember you are not alone. Take your time to make informed decisions when transacting or investing in the crypto to avoid rug pull, among many other harms.

Author: Gate.io Observer: M. Olatunji
* This article represents only the views of the observers and does not constitute any investment suggestions.
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