Is FOMO Trading Killing Your Account? Here’s What To Do Instead

As a trader, you’ve probably felt that sinking feeling when you watch a stock soaring without you. Your mind races, your stomach churns, and you feel an irresistible pull to enter – despite what your trading strategy dictates.

This, dear trader, is FOMO trading – the Fear of Missing Out.

And this impulsive trading is one of the deadliest enemies of profitable trading.

The stock market and cryptocurrency market are surging upward and the memes about throwing technical analysis books out the window are flooding trading forums everywhere.

Many of these explosive moves are part of the so-called market hype around the AI boom, where anything remotely connected to artificial intelligence technology is seeing astronomical gains.

But these parabolic price movements suggest something beyond pure fundamentals is at work here: They’re undeniable evidence that the fear of missing out (FOMO) is driving the 2024 market frenzy.

Trading driven by FOMO affects most investors, 73% according to recent studies. Even worse, FOMO trading leads to 65% more losses.

Those numbers are truly alarming.

With the rise of trading apps and social media, countless traders feel pressured to chase every trending stock and hot tip.

But that is exactly when smart traders should step back and show investment discipline.

As of 2024, there have been numerous examples where FOMO trading and FUD (Fear, Uncertainty and Doubt) has devastated many retail trading accounts.

Sound familiar?

Then FOMO trading might be destroying your returns. In this guide and analysis, I explain why we fall prey to FOMO and how to overcome FOMO in trading with easy trading strategies.

What Is FOMO in Trading? (Fear of Missing Out) 

FOMO in trading is the powerful emotion investors face when they believe they’re missing out on substantial profits that fellow traders are already banking from hot market trends. For instance, it’s the urge that if you don’t buy that surging tech stock, you’ll regret watching others get rich.

When this emotional trading pattern takes hold, it often creates a destructive loop of buying high and selling low that can quickly decimate your trading account.

So how can we maintain the delicate balance between staying active in markets and following our trading rules?

First, let’s examine what trading psychology teaches us about combating FOMO impulses.

The Impact of FOMO Trading on Your Trading Account

FOMO trading’s destructive impact comes from its ability to override our rational decision-making process. Modern traders face constant pressure from social media platforms showcasing overnight millionaires and viral trading success stories.

The damage to trading accounts stems from multiple psychological factors that emerge during market volatility, including panic, overconfidence, revenge trading and overexposure. The dynamic nature of financial markets creates endless triggers for these emotions. From breaking market news to viral stock tips to influential traders posting massive gains, countless situations can spark dangerous FOMO-driven trades.

Here are three key warning signs that FOMO is influencing your trading decisions:

• Do you notice physical anxiety symptoms? Are your hands shaking or is your breathing shallow?
• Is your mind constantly replaying missed opportunities like the Bitcoin surge or Tesla’s meteoric rise?
• Are you acting on pure emotional impulse rather than following your established trading strategy?

If you’re nodding your head to any above, you’re likely in the grip of FOMO.

FOMO Trades Examples

Take the cautionary tale of Mark, a retail trader who lost $50,000 chasing meme stocks in 2021. Or consider Sarah, who blew up her entire trading account trying to catch the NFT craze at its peak. According to a recent stud, 73% of retail traders admit to making poor trading decisions driven by FOMO, with an average loss of 35% of their account value. The data shows that FOMO trading isn’t just psychologically taxing – it’s a direct path to financial losses.

The Cost of FOMO: Recovery Timetable

Percentage Loss	Percentage Recovery Needed
10%	11.11%
20%	25%
30%	42.86%
40%	66.67%
50%	100%

Note: This table illustrates the percentage gain required to recover from a specific loss. For instance, if you lose 20% of your investment, you’ll need a 25% gain to return to your original position.

How to Deal with FOMO in Trading

Overcoming your FOMO tendencies won’t happen overnight, so don’t be too hard on yourself when you notice those impulsive trading urges surfacing occasionally. Managing FOMO requires rewiring your emotional responses to market movements – and that takes consistent practice and patience. The urge to chase every profitable trade can be overwhelming.

Here are five proven strategies to handle FOMO and develop professional trading habits:

Strategies to Overcome FOMO Trading 

#1 Acknowledge Your FOMO

The essential first step to beating FOMO is recognizing it exists. This simple acknowledgment can be surprisingly powerful – believing that other traders are always making better decisions can leave you feeling frustrated and inadequate.

Denying the presence of FOMO prevents traders from addressing their impulsive behaviors, leading to a continuous cycle of emotional trading decisions and not following their trading strategy. 

How to Acknowledge FOMO

Understand that FOMO impacts even veteran traders regularly. Consider joining trading communities or forums where you can discuss these challenges openly with fellow traders. 

#2 Master Trading Psychology

FOMO is fundamentally a psychological challenge; emotional decision-making can override your rational trading system and make you doubt your analysis.

These thoughts often indicate you’re trading reactively instead of strategically:

“That stock just jumped 20%! Everyone else must be profiting big time. If I don’t get in now, I’ll miss the entire move!”

Emotional trading typically creates a dangerous feedback loop – entering positions hastily, experiencing anxiety, closing at a loss, feeling regret, then repeating the cycle… 

#3 Manage Your Social Media Consumption**

Trading social media can provide valuable insights, but it can also fuel FOMO – especially when your feed is filled with traders posting massive gains screenshots.

You might need to reassess your social media habits if thoughts like this are common:

“Let me check FinTwit for trade ideas… but everyone’s posting huge wins. Why am I not making these returns?!”

Excessive social media exposure can undermine your trading confidence when it seems like everyone else has secret knowledge you’re missing. It often amplifies FOMO rather than improving your trading. 

#4 Keep a Trading Journal

A detailed trading journal will track your trading decisions and analyze your performance. It’s a powerful accountability tool, helping you identify successful patterns and eliminate emotionally-driven FOMO trades.

#5 Implement Sound Risk Management

Proper position sizing is critical for breaking free from FOMO – and when impulsive urges strike, having strict sizing rules prevents one emotional trade from devastating your trading account.

Your position sizing rules become crucial when thoughts like this emerge:

“Everyone’s making money in this rally, maybe I should increase my position size… I can’t afford to miss this move.” 

FOMO can make overleveraging seem justified, but it never replaces sound trading strategy. Always consider the worst-case scenario so you can size positions appropriately.

Remember: Building these habits takes time, but consistently applying them will transform you from a FOMO trading trader into a disciplined market professional. The key is progress, not perfection.