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Beware investing based on FOMO or FUD

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As in most walks of life, in cryptocurrency trading specifically, neither FUD nor FOMO is your friend.

FOMO

Fear of missing out (FOMO) is a social anxiety stemmed from the belief that others might be having fun while the person experiencing the anxiety is not present. FOMO is also defined as a fear of regret, which may lead to concerns that one might miss an opportunity for social interaction, a novel experience or a profitable investment. It is the fear that deciding not to participate is the wrong choice.

FUD

FUD describes the spread of “fear, uncertainty and doubt” (usually through the media). This is commonly used to describe the fear-based factors that then drive our trading.

Beware of FOMO or FUD in investing

FUD can cause the price of a token to fall, not because of facts or graphs, but because of bad news spreading on social media. Bad news is often in fact unfounded. Fear, uncertainty and doubting thoughts spread from the media can be described as FUD.

FOMO is a more personal thing. It’s the fear that someone is enjoying something (for example, the fear that we will lose profits while others are choosing their Lambo). FOMO can force you to buy tokens, not withdraw profits from tokens, or not place a stop for the tokens that have already grown significantly. This fear is what causes people to buy at the top of the price or hold on during falling prices after making a profit (and lose some or all of their profits). It is said that people act under the influence of FOMO when they act on an immediate initiative for fear of losing something.

The common thread here is that these are both emotional and fear-based factors that affect traders in the crypto market (and in other markets as well).

How to combat these trading mistakes

Stick the fundamentals and charts. If a coin’s chart looks good, and the fundamentals are there, stick to your strategy and take emotion out of it.

Notice FUD early and react accordingly. If you think the price of a coin will drop irrationally, set your stops and be prepared to buy back in on the dip.

Conclusion

Don’t make trades based on your fear. However, if you predict that others will react to fear, calibrate your trading strategy accordingly. In summary, say no to FOMO, but consider the effects of FUD.

Source: Wikipedia.org, Cryptocurrencyfacts.com

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