Syndromes and fears in trading and how to avoid them

FOMO (fear of missing out) and how to deal with it

Zkratka FOMO je z anglického Fear of Missing Out, tedy něco jako strach ze zmeškané příležitosti. Určitě znáte momenty, kdy jste si říkali:

• If I had made that trade, I could have made a nice profit today.

• I told you the trade couldn't work.

• I told you the trade couldn't work.

• I should have exited the trade right then.

• I should have waited a little longer, etc.

If these and similar phrases seem familiar, you are probably susceptible to FOMO syndrome. These phrases come to your mind as a reaction to an opportunity that has been or is in the market versus your desire to make money in the market.

The stronger your drive to make money, the more likely you are to develop this syndrome.

FOMO manifests itself, for example, by a trader letting losses run and exiting profits very quickly. Or it shows up in a situation where you enter a trade too early without waiting for confirmation. The worst thing that can happen is that the market will randomly reward you at the beginning leading you to believe that this kind of approach will work.

FOMO is unfortunately widespread among traders but it is also deadly. FOMO will constantly force you to break the rules you set. If you see that you could have taken a trade at a better price than what your plan set you, and it makes you feel sad or upset, angry, etc., then next time you will want to avoid these unpleasant emotions and will enter the trade randomly without a plan. Instead, you should try to find out why are you feeling this annoyance. The best place to look for answers is within yourselves.

Defense against FOMO:

• You have a solid trading plan that you trust and follow.

• Always wait to make a decision until the candle closes. You may not get the best price, but you'll have a greater likelihood of success.

• Cultivate a resilient and disciplined mind. You can only do this by constantly repeating the right things. Any breaking of the rules will only cause you to add another layer of emotional baggage to your mental setup that will make success in Forex more difficult.

• Understand the reasons why FOMO comes in. Most of the time the cause is life dissatisfaction.

Fear of loss and how not to let it affect you

You can develop this fear by having experienced a major loss before and not wanting to experience it again. The result will be that you will be too fearful and distrustful. In trading, fear of loss is related to a part of the brain called the amygdala. You have suffered a loss and the amygdala registers it because the amygdala remembers everything that hurts or threatens.

In fact, we share the amygdala with reptiles, for example, and it's the oldest part of the brain evolutionarily. It regulates our emotional reactions and behavior.

While FOMO will tempt you to enter a trade unplanned or exit it unplanned, fear of loss may cause you to not enter a trade at all or to enter it but with very little volume because you fear losing capital.

If a trader suffers from fear of loss, it is good to remember that every trader has losing trades. The important thing is to look at trading not from the perspective of individual trades, but from the perspective of the system as a whole, which should be profitable. It is also important to think about the size of the loss for each trade. For some it is acceptable to risk 2% of capital per trade, for others, it will be 0.5%.

Self-saboteur syndrome

Behavior, where you cause yourself to make achieving your own long-term goals unrealistic, is classified as self-sabotage or self-destruction. The cause of self-destruction is low self-esteem and surprisingly, according to Dr. Ellen Hendriksen, it can also be fear of failure. But at the same time, you perceive yourself as not deserving of success.

When it comes to trading, for example, if you make some good trades but at the same time perceive yourself as worthless, instead of rejoicing and celebrating, you pull the brake and do something that confirms you are indeed a loser. In other words, when you make a profit, you then intentionally make the situation harder for yourself and give back to the market what you made.

Why? Because people like consistency and our actions are always in line with our values. So if you think you don't deserve success, your actions will confirm it.

Another cause of self-destruction in trading is boredom. You look at the charts and nothing happens. The signal doesn't and won't come. So you press a button just to get some action. The problem is when this behavior is not intermittent, but repeats itself regularly. Then there is a familiar feeling of instability and chaos, and the chance to succeed is one step further away.