If you are new in the cryptocurrency world, then you may be hearing the terms “FUD” and “FOMO” and wondering why everyone use them so much. The truth is that in trading, neither FUD nor FOMO is your friend. Both terms are highly related with the emotional bias that emerges when trading.
FUD and FOMO are both based on the same dangerous emotion: FEAR. Traders who gets affected by those terms usually experience significant monetary losses. Warren Buffet, one of the most known investors on earth used to say: “ If you cannot control your emotions, you cannot control your money”. Similarly, the well-known trader and author, Alexander Elder is also a believer of this philosophy, we quote him: “Many traders ride an emotional roller coaster and miss the essential element of winning: the management of their emotions”.
Professional traders know than controlling emotions is the hardest thing to do, that’s why crypto enthusiasts usually gets affected by FOMO and FUD. But, what actually do those acronyms mean?
FUD the short-version of “Fear, Uncertainty, and Doubt”. The terms refers to bad news spread around social media that can affect the price negatively. In most cases, the information is not accurate, precise or correct, thus creating a misleading reality. The cryptocurrency market has experienced several times the consequences of FUD. Cryptocurrency valuations have been affected by those ungrounded rumors and claims, affecting the veracity of the whole market.
FOMO, on the other hand, is not “external” but “internal”. Those four words are the acronym of “Fear Of Missing Out”, which refers to someone’s feeling of not being part of the momentum. The sentiment, based on fear and regret, makes people make irrational entries in the market, therefore, causing them to buy at the top or sell in the bottom of a movement.
To conclude this chapter, we will like to highlight that there are ways in which traders can avoid thsese two phenomena. The first solution is sticking to fundamentals and charts, as well as doing deep research before entering a trade. As a second advice, it is important to detect those emotions right in advance, because in many cases you can profit for them… you may be wondering something like: wait, what?
Yes, you can profit from the irrationality present in the market. If your analysis and research are on point, then you can profit from a dump or a pump, creating even a better entry than the one you originally planned. Next time detect FUD and FOMO in the market…. Then remember to use this information to profit, as the most successful investors know when and how to use it in their advantage.