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This is just plain insanity, but I don't know how to stop this!
It has many names FOMO (Fear of Missing Out Trade), False BO (Break Out) trade.
Before trading session I swear/rehearse/repeat aloud/pre plan/promise that I won't take another BO/FOMO trade today but at the EOD one or two FOMO trades manage to escape into my trades.
Why is this happening? How is this happening ???
Any practical advise to stop this addiction to FOMO trades?
On the level of theory I understand, it's human nature, belief system, visualization can help etc.
But in practice when markets surge, all theories go to toss and I still end up taking FOMO trades.
Can you help answer these questions from other members on NexusFi?
1) What you're talking about is discipline. Discipline comes from confidence. Confidence comes from experience. Experience comes from trading a lot of times, and knowing that your strategy, over time, makes money. It will not make money on every trade, but over time it should make money. If you are trading systematically, experience can also come from doing rigorous research.
2) I am a systematic trader, and I like to compare systematic trading to playing blackjack as a card-counter. Even as a card-counter, with a positive expected return, there are going to be times when the Dealer is showing a 6 and gets 21. There are going to be times when I split double-aces and bust-out. There are going to be times when I get blackjack, and I'm only betting my minimum unit size. It happens to everybody and it's part of the game. As a card counter, I would not change my betting strategy simply based on the outcome of 1 or 2 hands, or because some other player happened to get blackjack. You have to play thousands of hands of blackjack for the odds to work in your favor. It's the same thing with trading.
3) It is a lot easier to avoid getting fixated on the happenings in one market if you're trading a portfolio of markets. You do not feel compelled to "make something happen" each and every day, and you're not terribly upset if one market moves big and you're not in it. Markets move all the time. You need to have the discipline to wait for the right opportunity to present itself, and then have the courage to go after it.
BTW, if you're interested in the analogy with blackjack, I recommend the book "Las Vegas Blackjack Diary" by Stuart Perry. It's about his experiences as a card counter in Las Vegas, and although it might sound boring, it's very interesting. Any trader with any experience under their belt will soon recognize the ups-and-downs of making money.
I recommend this book because the author projects a fairly detached view of how each hand performs, much like a trader should look at each trade.
Usually inside every question is a partial answer to help resolve.
FEELINGS are much more powerful than thoughts - documented 6 seconds faster in fact
which is why thought awareness is nice but is easily over ridden by feelings.
Specific to FOMO and your issue- You may be gaining something at a deeper level
and possibly protecting yourself from a deep issue unrelated to trading. These are usually formed
during childhood ages 0-6.
Addressing these core issues can take you on a fascinating journey the majority of people will
refuse to travel. It will require you to go back and face your inner demons - observe them and
slay them. How do you know what they are if you have no idea? That's the hard part.
There are professionals that can do this for you. But it will cost $$.
Some of the related fears that can be tied to this are:
Regret and Shame - Shame is the most powerful.
Why don't you try running trades on two accounts. In one account, trade as you do normally, and in the second account, take the most selective trades. So for example let's say there's an aggressive entry price (the one you are currently taking because of the fear of missing out), then a better price, and finally the best price for the trade plan.
If at the end of the week or month the second account far out performed the first account, then maybe you'll be less inclined to take the impulsive trades knowing you were capable of better results while having fully missed out on some trades.
the way I get over it is by watching 5 markets. usually there's one that's moving and the capital margin is tied to that one. when the others start moving, i can't do anything about it. if you're only watching one market, you're waiting and waiting and when it first starts moving you jump in, and that's usually the wrong time.
@rocktrader consider that impulsivity is many times a result of anxiety. FOMO is a symptom of anxiety, and underneath it all, it reveals why you trade, whether economic reasons to be in a better place, or just pure boredom as it fills the "action" gap. To be outside the market and have a lack of inactivity, causes FOMO. The hardest thing for a trader is to fight randomness and seeing things that are not there because you always want to justify a trade. Build a reward system associated with discipline, until you get used mentally and physically to get rid of bad habits.
I hope this helps.
Matt
There is a risk of loss in futures trading. Past performance is not indicative of future results.
Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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I have trouble with this too but I am making significant progress. One of the things that I recall from " daily trading coach" by brett steenbarger is that your actions are driven by your state - how you are feeling pretty much. And if you can understand why you are feeling the way you are, this is very powerful because you can then exercise control over how you feel, or your state, and in turn - your actions. As a discretionary trader, I view state management as the most important thing that determines performance, at least for me. Less important for a beginner because first you actually need a profitable strategy to execute. The optimal state to be in is where you are relaxed, but focused (These are both extremely important, cannot emphasises enough. One isnt enough).
For me, FOMO is a symptom of me needing to make money, to get results. It is so important to me I will force trades when there isnt really any opportunity, and when I have a trade on I am extremely anxious. Often this leads to me taking profits too quickly. Also, after having a few losing trades, I become frustrated and want to make it back and so put in bad trades which leads to a negative feedback loop. Mindfulness is very important because if you understand what drives you to make mistakes, you can recognize the feeling and then address it and interrupt the cycle. I think there is a big difference between reading something and understanding what it means, or how it applies to you - took me months of doing the same thing over and over again before the lessons in daily trading coach started to really make sense.
So, the solution I used was to firstly get rid of my toxic assumptions - that a good trade makes money and that a profitable day is a good day. I also subconsciously believed that somehow if I traded very well I could control my results and that every loss was my fault. I had to accept that every trade was fundamentally random, even if it was a very high probability win, this took off a lot of pressure. Instead of focusing on PL. I decided to set process goals that I could meet every day, and if I did this, no matter the outcome, I could feel good because I know I traded optimally.
My process goals are this.
1. Stay relaxed, focused and mindful. When markets become volatile, stay detached, take a step back and look at the big picture (i.e. zoomed out chart, how far away my good levels are), helps me to get absorbed and chase.
2. Adhere to risk management rules. After 3 losses in a row, I take a break. If I have another 2 losses after that
Im done trading for the day. I also have a daily loss limit.
3. Journal my trades, my reasoning and emotions during the day.
4. Let profits run to support/resistance levels, and get bigger with higher timeframe levels and set higher profit targets for them.
Understanding yourself is just as important as understanding markets.
Just wanted to add a few things I've learned from others.
1. The Market is an opportunity creating machine. If you miss one, you will ALWAYS get another one. (try to understand, convince yourself and then REALIZE this fact).
2. Don't be in a hurry to make money.
3. Practical Solution : Go to a Bus Stop, and when you watch a bus coming towards the stop (the bus that takes you to the destination you want), DON'T GET IN. THERE IS A LOT OF URGE TO GET IN, BUT DON'T
Let 4 or 5 buses go like that... LET GO..... IT IS OKAY... There's always another bus coming if you miss one... Practice this... This realization gave me peace... When you are at peace, I guess it helps to perform better.
Despite these things, there is NO SUBSTITUTE to having a decent methodology.
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