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FOMO Meaning and Definition
FOMO (fear of missing out) is an emotional response that causes investors to fear missing profitable investment opportunities around popular stocks & cryptocurrencies.
For example, traders experience FOMO when stocks began soaring in price and you feel like you missed out on some easy gains.
Understanding FOMO Trading
FOMO trading & investing is extremely dangerous because you make irrational decisions based on emotional behavior instead of using solid fundamental & technical analysis.
When you FOMO into an investment, you will likely buy at the top of the peak and experience losses as the smart money takes their profits at the top.
The only way to protect yourself from FOMO trading is to avoid chasing gains and wait for good entry points whenever you place a trade.
How FOMO Works
An investor will hear about a hot stock & cryptocurrency then watch its price rise in value. The higher the prices goes up, the more risky the trade gets but the average investor doesn’t care about proper risk management.
Fear and greed become the 2 dominant emotions, which cause the investor to buy near the top of the peak hoping the stock or crypto will continue running higher.
Examples of FOMO
There have been several examples of FOMO investing gone wrong over the last few years that wiped out brokerage accounts around the world. Here’s a list of some popular FOMO events that caused traders & investors to lose their shirts:
- January 2021: Gamestop & AMC Saga
- April 2021: Coinbase IPO
- November 2021: Tech Stock Bubble
- November 2021: Crypto Dump
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