Fear of Missing Out (FOMO) is a modern lexicon coined as the social anxiety from the feeling that others are making more money, having more fun or living better lives.
In addition to fear, greed and ego, FOMO is the latest gremlin to dance on a trader’s head, ready to slip profits into losses. It’s easy to see how this occurs. As SPY makes its moves, we see amazing opportunities in both calls and puts, believing others are making money while we may sit on the sidelines and watch. FOMO is a powerful emotion. Often times, the trader enters on the idea that the market will continue its chosen path, then the direction changes.
Any reason to trade fueled by emotion is generally risky. I like to maintain a position of emotional indifference, analyzing fundamentals and technicals with an eye on the psychology, and not be concerned that others may be making money or not.
All emotions need to be kept in check. I like to take a break after each trade, letting my emotions level off. The worst thing to do is to re-enter off an emotional high or low.
~ Hugh Grossman, Head Trader, DayTradeSPY