Don’t Let FOMO Derail Your Trading Success: How to Master Your Mindset and Stay Focused 3 Tips

fomo and day trading

Don't Let FOMO Derail Your Trading Success: How to Master Your Mindset and Stay Focused

Table of Contents


Hello traders! Today, we are going to deep dive into a topic that affects many of us: FOMO, the Fear of Missing Out. In this article, we’ll explore what FOMO is, how it affects us, and touch on some lesser-known aspects of why it impacts us and how to combat these feelings.

My Personal Experience with FOMO

For me, I’ve noticed that FOMO tends to hit hardest in a few specific situations: right when I open the chart, after about 30 minutes with no setups presenting themselves, and ironically, right after I hit my daily profit target.

Slowly, with deliberate effort, I’ve been able to reduce my attraction to FOMO and make decisions that are in my best interest. If you’ve had encounters with FOMO where you impulsively react and rush into the market, only to realize the negative impact this has on your trading business, this article is for you. After we clearly define FOMO, we’ll use research to shed light on its ugly face, providing us the tools we need to constantly loosen its grip on our mindset and actions.

What is FOMO?

In general, FOMO refers to the anxiety that an exciting or interesting event may currently be happening elsewhere.

To define FOMO even more, let’s use two research study definitions:

  1. Przybylski (2013) defines FOMO as a pervasive apprehension that others might be having rewarding experiences from which one is absent. It is characterized by the desire to stay continually connected with what others are doing.
  2. Abel, Buff, and Burr (2016) found that FOMO is associated with lower need satisfaction, lower mood, and higher levels of boredom and loneliness.

How FOMO Affects Traders

As day traders, this makes perfect sense. When we haven’t taken a trade in a while, we may feel like we are missing out on opportunities other traders are seizing, even if the market volatility is low or in a tight range. When we get bored, our minds, driven by dopamine, may start screaming internally, “What are you waiting for?” Like Linkin Park and Jay Z. 

But why are we pulled toward trading for the sake of trading when we know we need to follow our trading plan? Of course it’s the draw to financial gain, but there is more.

Research on FOMO

Research by Abel, Buff, and Burr (2016) indicates that FOMO is associated with lower need satisfaction, lower mood, and higher levels of boredom and loneliness.

This gives us insight into what fuels the FOMO monster. When we present a lower mood, higher levels of boredom, and loneliness, it’s like a siren call for FOMO.

Additionally, Riordan (2018) highlighted that individuals with higher levels of social anxiety and lower levels of self-esteem are more prone to FOMO. Watching trading “gurus” on YouTube making more in a month than you’ve made in a year can also create a fertile ground for FOMO.

Research tells us that most humans have an inherent drive to evaluate themselves, often in comparison to others (Festinger, 1954). This was further expanded upon by Woods, who identified two types of comparisons: upward (comparing to someone better off) and downward (comparing to someone worse off). Buunk and Gibbons (2007) found that upward social comparisons can lead to feelings of inadequacy and envy, while downward comparisons can enhance self-esteem.

How to Combat FOMO

To combat FOMO, we need to limit our exposure to things that trigger it. Here’s a weekly plan to help upgrade ourselves and reduce the feelings of FOMO while trading:

  1. Digital Detox

    Check your daily phone usage and try to reduce the time spent on it. Make small adjustments like not using your phone until you fall asleep, not taking it into the restroom, and not using it while eating. The goal is to reduce the need for the dopamine that electronic devices provide, which will also help reduce your mind’s craving for those dopamine rushes from the trading chart.

  2. Establish Clear Guidelines

    It’s easier to avoid actions that aren’t in your best interest when you have clear guidelines. For example, I experience FOMO when I hit my budget or after winning a trade and wanting to jump back in for more profit. By establishing a rule that I must log a trade after taking it, I was able to add a space of awareness into my actions.

  3. Reestablish Your Goals

    Having a clear attachment to a goal helps you move in that direction naturally, making impulsive actions that divert you from your goal stand out more clearly.

FOMO is best dealt with when we get out in front of it and prevent it. Change starts with awareness, which is best cultivated by mentally thinking through potential situations with a positive mindset. That is why it’s crucial to have a trading system. When we build on top of a solid trading strategy to create a trading plan and add to that a self-sufficient improvement system, overcoming the inevitable trading hurdles becomes easier.

Thanks for reading! Feel free to leave a comment and let us know your thoughts. Happy trading and be sure to remain the hero of your story.

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