Getting Away From FOMO

Like most traders and investors, I am a recovering FOMO (fear of missing out) addict.  What is it about this irrational thought that brings out the worse in us?  We don't like to see others doing well when we are performing at a subpar level.  Hence, we tend to press and push harder, trying to play catch up so we can enjoy the same success as everyone else.  Everyone loves to join the party, even if they are late to arrive.

Investing for the long term has great statistical data and results for the bulls.  Just put your money in high quality stocks and watch it grow, reinvest those dividends and watch it compound.  after 25-35 years you'll have a nice nest egg to sit on.  No emotions involved, just keep putting your money in and let it work for you.

Trading is an entirely different game, based on short term movements, volatile eruptions and pinpoint accuracy.  The psychology of trading is fascinating.  One can miss out on opportunity and chase endlessly to catch up to the crowd, especially being out of the game for awhile.

Our goal is to push FOMO aside and create a bubble for ourselves with shades drawn, not looking at others but paying attention to what is important to us.  If we cannot privatize our trading and technique, we'll be chasing forever, and our edge will be useless.  It's a formula for disaster and eventually the poorhouse.

I recently found myself in a FOMO situation, and as you might expect the results were very poor.  After a short travel period into early March I got back to trading and found myself in a tough market, though I had plenty of firepower (cash) to work with.  I was behind, but I knew I could catch up.  The markets were moving wildly for various reasons, and I needed to make a move to get in sync with the markets, re-establish my edge after a brief break.  Or, so I thought.  

I had a week where I was on the right side of the trade (bearish, with puts mostly and a few calls), ended up losing money on three of five days that week (just before fed week) as the markets were down substantially.  It was remarkable - to be on the right side of the trend and lose money everyday. Now, I am not some novice trader, having been in this seat for more than 20 years my sustainability is there.  But even the most experienced can have a rough stretch, it's how you manage it afterward that makes the difference.

I can see you now as you read this, nodding your head up and down saying 'yep, i know the feeling'.  

I bring this story to you because I felt FOMO that week. It happens to everyone, and if someone says it doesn't they are lying or just don't trade like we do. For me, it had nothing to do with the technicals, the charts, sentiment or options.  I needed to get back in and show good results, and no matter what it would happen as I want it. This was the exact WRONG way to approach the trade. It didn't happen, and I've since re-grouped and will wait for the moment when that need to belong and join with the crowd goes away.