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Has the latest market rally got you frustrated? Lots of traders are feeling FOMO (fear of missing out) right now. If you’re one of them, this blog post on market psychology is for you.So, let’s talk about those rallies. When markets start to rally, traders naturally have a high degree of skepticism. Bull rallies are usually preceded by days and even weeks of bearish behavior. Stocks would zig when they should have zagged. Our natural defenses rise and our trading instincts tell us to wait longer so we don’t feel the pain of losses. That is called the wall of worry. It can get to a high level but it is not insurmountable to clear.
FOMO can be devastating to a portfolio
But what happens when you have several up sessions in a row? And what if the trend shifts midstream from bearish to bullish? Even for experienced traders, it can be hard to find the right entry point. The days go on, markets go higher, and we continue to wait on the sideline, wondering what would have happened if you had taken the plunge and gotten in days ago. This is classic FOMO.Let’s be honest, we all suffer from different degrees of FOMO.But some traders get so frustrated that they jump in with both feet. They have no plan of attack. They just guess at their ideal entry point. This is when the worst possible result will happen, because the market is probably overbought. If a pullback occurs and they panic and sell, it can be devastating to their wealth.
Market psychology says: Pay attention
If you want to contain your FOMO and take the guessing out of the equation, you need to follow a basic principle of market psychology. Pay attention!
That might sound hard to do, but I have found that FOMO goes away fast when I take a break from trading. Eventually, your mindset will be ready to get back into the game.These are good questions to ask yourself. They’ll allow you to stay ahead of the markets (but not necessarily make predictions) without the helpless feeling of watching the markets move higher without you.More By This Author:Starbucks Corp – Chart AnalysisWhy Did Volatility Collapse Last Week? Intrepid Potash Inc – Chart Analysis
