What is FOMO? What is FUD? These are 2 psychological terms (effects) familiar to most investors in the financial field, especially Crypto. These are two common syndromes that new investors often encounter, leading to unfortunate consequences. So what exactly are they? How to overcome these 2 syndromes in trading?
What is FOMO?
FOMO (Fear of Missing Out) is a term referring to the fear of missing out, the fear of losing opportunities. People with this syndrome are often haunted by the fear of missing something, losing what everyone around them will achieve. Therefore, they often make mistakes because they make irrational decisions, leading to unpredictable consequences.
In the market Crypto, when a coin is on a short-term rally, the victim of this syndrome “gets” the urge for a large “profit” like other investors and immediately buys the coin without thinking. think about technical and fundamental assessment, this action is called FOMO.
What is FUD?
FUD (Fear – Uncertainty – Doubt) is a term referring to the syndrome of fear, uncertainty and doubt. In the fields of business, politics, etc. FUD is a tactic of spreading fake news that affects perception by creating false information.
In the market Crypto, FUD only feels afraid of traders when there is bad news about the market in the media. Investors suffering from this syndrome quickly sell off their coins unnecessarily, leading to a severe drop in the market price, enabling “sharks” to collect coins at a cheap price.
Correlation between FOMO and FUD
In fact, FOMO and FUD are very harmful tools applied by influential organizations and individuals in the cryptocurrency market to serve their own interests.
Usually the organizations that create FOMO or FUD will have control or great influence over many major media channels from which they can influence as many traders as possible.
While FOMO is used as a tool to push up the price of a cryptocurrency with the purpose of creating liquidity to take profits, FUD is a tool used to push down the price of a cryptocurrency with the aim of GOING in as many coins as possible. as much as possible before activating FOMO to take profits.
Consequences caused by FOMO and FUD
Inexperienced investors in the market will be susceptible to these two effects, and the most obvious consequence is that their assets decrease after each FOMO or FUD.
But, the bigger consequence is that investors no longer believe in their own judgments and decisions when entering orders because they have previously suffered a lot of losses due to FOMO and FUD.
And once an investor no longer believes his judgment, there is a high probability that the investor’s assets will return to 0.
Normally, investors who often suffer from FOMO and FUD will be those with little experience in the market and will have signs such as:
- Impatience while trading.
- There is no trading plan before entering the order.
- Trade the news but don’t update the market fast enough.
- Analytical techniques are not yet rigid, leading to easily shaken judgments.
How to overcome FOMO and FUD syndrome in trading
FOMO and FUD syndrome are both common syndromes among novice investors and inexperienced investors. Here are the rules to avoid FOMO and FUD:
One of the core factors determining success or failure in decisions lies in determination and steadfast will. Consistency helps to distinguish right from wrong, when the time has been determined and patiently follows the pre-planned plan. Avoid making decisions that are out of your control and out of your control.
Understand the market
Understanding the market is one of the hardest rules to follow. Even seasoned investors do not dare to assert how knowledgeable the market is. However, from a newbie perspective, you need to understand the prerequisite that: the crypto market is still very potential and has a lot of opportunities. If you see that the coin has been FOMO and overpriced, ignore it because this opportunity is not for you.
If you have FOMO and participate in the game “swinging to the top”, accept the stop loss. Accepting your mistakes helps you gain experience in this market.
Effective capital management
Efficient capital allocation and management helps you to minimize the risk posed by FOMO and FUD. In addition, good capital management helps you to maintain a stable profit, then FOMO and FUD can no longer influence your decision.
Determine your investment style
Determining investment style includes short, medium or long term to determine how decision making is affected by FOMO and FUD. If you are short-term (surfing) style, following the FOMO waves will help you make quick profits. With a medium or long term style, FOMO or FUD are both buffer waves in the financial market that are always a must, if you are confident in your technical and fundamental analysis skills then be confident in the results. there.
To be able to do these things you need to have knowledge. When you have your own knowledge, you can determine if a news is real or fake for others to listen to, have fundamental analysis skills and technical analysis to know if the current price zone is safe to buy. Join or not, what are the risks.
Financial markets are a game.”Zero Game”: money will flow from the pockets of the uninformed to the pockets of the knowledgeable. Choose your position as a earner or a loser depending on you.
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