Trading Mistakes to Avoid – FOMO

If you’ve spent any time trading or investing, you’ve probably experienced FOMO—the dreaded Fear of Missing Out. It’s that overwhelming feeling that you’re about to miss the trade of a lifetime, the one that’s going to go “to the moon” while you’re stuck sitting on the sidelines. You see a ticker spiking, social media lighting up with success stories, and suddenly your rational mind gets completely taken over by the feeling that this could be your ticket to riches. If you miss this trade, you might never get a chance like that again. Opportunities for for monster winning trades don’t come along often, so the last thing you want to do is miss one. You have to jump in—right now—before it’s too late.

So you jump on the bandwagon, only to find yourself holding getting in at the very tip top of the green candle that ends up closing red and taking your money, and confidence, down with it.

Here’s the truth: FOMO is one of the fastest ways to blow up your account. It preys on your emotions, bypasses logic, and pushes you into trades you’d never consider if you were thinking clearly. But if you learn to recognize FOMO and deal with it effectively, you can turn it from a portfolio-killer into a powerful learning opportunity.

FOMO Flavors

FOMO can occur in many different forms. Let’s look at a few:

Pump and Dump

You notice a stock surging on the back of some news story, rumor or social media post by a “so called” expert.  You jump in, knowing nothing about the fundamentals or technicals of the ticker other than what you’ve just red on Twitter. In most cases, the price crashes just as fast as it surged, in at the peak, leaving you holding a bag with a big fat loss. You can be sure that someone trader or institution made money on the move, probably at your expense.

Trader Envy

Everyone seems to be making money hand over fist on a stock or other type of financial instrument (like crypto) and you’re just sitting and watching it happen, thinking that it’s simply too good to be true. Finally, you get tired of watching and missing the get rich quick train, and decide to pull the trigger and run with the bulls.

There are times when you can get into a stock after it’s already begun surging, if it’s a major move supported by large volume. These types of moves often last a while, and there’s plenty of meat left on the bones even for late comers. But at a certain point, even these larger moves lose steam and start pulling back, and you don’t want to be buying right before the pullback.

The more classic envy FOMO scenario would be something like what happened with Gamestop in January of 2021. Thousands of retail traders watched GME surge on a daily basis and piled in for the ride. Those that got in in the teens and twenties and were smart enough to sell made out like bandits. But there were plenty of folks who got in at 200 and 300 and even the 400’s. In fact, on January 28, 2021, GME hit an all time high of $483 and ended the day at $193.60. That means a bunch of unlucky FOMO victims bought it at $483 and rode it down to…who even knows.

Why did they do it?

They most likely saw everyone and their mother posting their gains on Wall Street Bets and said, why shouldn’t I take advantage of this and make a killing too? Fomo envy at it’s peak.

FOMO Chase

You’ve been watching a stock for a while, understand its technical setup and are waiting for it to break through a specific level to take a trade. Suddenly it break through and quickly moves a few points higher. Now your kicking yourself for missing the move. Your trading brain is telling you to wait for a pullback before getting in, but your FOMO head is telling you to get in immediately before you miss even more of the move. As hard as you resist, you just aren’t powerful enough to overcome your FOMO, and you buy several points into the surge. Guess what happens next? Of course, it pulls back a few points.

You still might have a good trade on your hands, although you could have gotten a better entry if you had waiting. But especially if you are trading short term weekly options, that few point pullback could hit you disproportionately hard and shake you out of the trade before you have a chance to participate in the upside you’ve been planning to take advantage of.

Why Does FOMO Happen?

FOMO is one of those things that you know is wrong but you just can’t help but do. It’s similar to a vice in that respect. You know it’s wrong and you’ll probably get busted for it, but you do it anyway because the reward is just so enticing.

Here are some ways to view FOMO from a psychological perspective:

Scarcity Mentality

You believe opportunities are limited, so missing one means losing out forever. Sure, there’s always another trade, but your FOMO overrides that truth. Instead of waiting for the right setup, you impulsively jump into trades, fearing you’ll be left behind forever.

Comparison Syndrome

Watching others share their wins—whether it’s on social media, in trading groups, or even among friends—can trigger feelings of inadequacy or failure. The constant comparison can make you feel like you’re falling behind, pushing you to jump into trades you don’t fully understand or haven’t planned for. You’re not really trading the market; you’re trading your emotions. This desperation to “catch up” often leads to mistakes, as you follow others’ successes without considering your own strategy or risk tolerance.

Loss Aversion

Missing a big trade feels like taking a loss, even if you never risked anything. In fact, studies show that humans hate losing more than they enjoy winning. So you beat yourself up over profits you could have made and start chasing to “make up” for the imaginary loss. This emotional reaction can drive reckless behavior, like entering late into overextended moves or abandoning your trading plan entirely.

Recency Bias

When you see a stock or market make a massive move, your brain gets stuck in the present. You start believing that the same explosive trend will continue indefinitely because your mind gives more weight to recent events than historical norms. This bias convinces you that if you don’t act now, you’ll miss out on the next big thing. The problem? Markets don’t move in straight lines. Most trends eventually exhaust themselves, and jumping in late can leave you holding the bag when the inevitable reversal happens.

The Cost of FOMO

Here are some ways that FOMO can destroy your trading account.

Bad Entries

Jumping into a trade after the initial move usually means entering late, just in time for a pullback or reversal. It happens to the best of us; you see a stock spike 10% in a few candles on some news item or social media rumor and you desperately want in because it surges another few candles. You market order in with large size (meaning a shit load of contracts or shares) to get your piece of the run at all costs and, the next thing you know, you’re watching that thick long green candle turn into a long, thin wick (Doji) that leads to an even longer and thicker red candle, wiping out the 10% move and leaving your P&L in shambles.

FOMO leads to bad entires, every time.

No Risk Management

In your rush to not miss out on the action, you’re risk management goes out the window. All of your rules dictating position size and stop loss positioning are trashed as you focus exclusively on making your fortune on this one running ticker. Without risk management you’re basically just making a blind bet with the odds stacked heavily against you, because the smart money that is driving up the stock is doing so in order to dump it at the highs and make a killing at your expense. They love it when you help them make their yacht payments!

Emotional Destruction

Besides destroying your account, FOMO trades wreak havoc on your emotions and trading psych. You’ll curse yourself for being stupid and ignoring all your rules and your injured pride will be looking for revenge against the trading God who screwed you. That’s make you jump into the next trade without proper analysis, hoping to get it all back. You’ll show them! Even worse, you might try to trade the same ticker that just killed you, and that never ends well. FOMO induced revenge trading can be lethal to your account.

How to Beat FOMO

Now that we’ve discussed what FOMO is and how it can seriously deflate your account and trading psych, let’s look at how to deal with it and, hopefully, overcome it.

Recognize the Feeling

The first step to beating FOMO is recognizing when it’s happening. Awareness is 90% of the battle, because if you don’t know you’ve got it, you can fight it.

The second you feel that overwhelming desire to get in to a surging ticker, take a deep breath. FOMO thrives on urgency, so slowing down and taking some breaths can help you think clearly.

Next, you’ve got to do a quick analysis of whether you’re looking at a FOMO situation or an actual opportunity to take a winning trade. Ask yourself, is the ticker following a setup or pattern that I can identify from my trading playbook? Even if it does, has it run too far and fast already? Remember that stocks don’t just keep going up in a straight line. Sellers eventually come in to take profits, resulting in pullbacks that you can buy. Most stocks will give you chance to get in off the highs, if you are patient.

What if the stock doesn’t pull back? Then you missed the trade and you move on to find the next one. And despite what you might think at the moment, there will be other opportunities to make winning trades. Better to miss an opportunity, than to take a FOMO loss.

Stick to Your Process

Before you get into a trade, force yourself to go through a process or a checklist, to determine if the trade is one you should take. Jumping into a trade because it’s running is not a process. It’s FOMO. Even if you are a momentum trader, you still need a process of identifying entry points, position sizes and stop loss and exit points before entering the trade.

Quick Following Hype

Stop living in Twitter, Wall Street Bets and You Tube to find trades and traders to follow. Social media makes it easy to feel like everyone else is crushing it, except for you. Traders spending most of their time on social media and posting their success stories are looking to make money off of followers either by hyping stocks they own and then selling them to those followers or by charging them for education or advice. The traders actually making money from their trading are spending their time doing just that, not bragging about it on social media. Follow their example and focus on learning and perfecting your trading, not on trying to find the shortcut to trading riches.

Bottom Line

FOMO is a trader’s worst enemy. It feeds on your fear of failing and leads to impulsive decisions that can wreck your account. It tricks you into chasing trades that don’t fit your plan, entering them at the worst times, and throwing risk management out the window. But you can beat FOMO by recognizing that it’s there, focusing on your process and remembering that there will always be other trading opportunities to take advantage of.