Addressing the Trader’s Fear of Missing Out

mprincipatoMarc Principato, SMB ForexLeave a Comment

One of the more entertaining things I hear out of forex traders that I talk to is, “I can’t believe I missed that 40-pip move! I left so much money on the table!”. My question is whose table did you leave that money on? What’s even funnier is when traders claim they’re losing money because they’re missing nice moves. This is the expression of a flawed mentality that usually leads these traders to getting too aggressive at the wrong times.

As I have mentioned in other articles, trading is a very psychological game. You must be on top of the crowd mentality while managing your own emotions within constantly changing market conditions. It is easy to lose sight of the fact that financial markets contain a high element of randomness and this doesn’t mix well with emotions.

For example, let’s revisit the missing a move scenario. You watch your favorite pair run up 50 pips. You missed the whole thing. There are three likely emotional reactions to this:

1. I can’t take it anymore! I’m buying now in order to avoid more pain of missing out. (do I hear top of the market anyone?)

2. It has moved so far without me, but it I know it’s too high. I will get short and make up what I missed on the pullback and I’m not going to use a stop because I know they will try to shake me out (if you know the conclusion to this story and you are still in the game, congratulations for making it this far).

3. I’m patient and in control of my emotions. As soon as thing thing pulls back 30% I will max out the leverage on my account because I am not going to miss the next upleg in this clear trend. (*cough* lower high! excuse me, I was clearing my throat.)

The kicker is this: Sometimes the market will randomly reward you for such behavior. This reinforces our emotional reactions and tricks us into thinking that this kind of behavior works. This is one of the biggest hidden obstacles that new traders face and what makes the learning curve so long and difficult (especially for the isolated trial and error people who don’t take trading seriously enough to seek out a mentor).

What new traders need to understand is the fear of missing out is only a fear. By itself it has no relevance to our performance. You can miss setups and moves all day long and guess what?

Your account stays the same. You can come back tomorrow and look for more setups because there is a limitless supply as long as we have freely moving markets.

We’re all in the trading business to generate profits, but it’s the focus on profits that actually makes this harder to do. The next time you’re faced with a move that you missed, remember that it’s the amateur who counts the money while the professional measures the risk. It is the professional who knows that profits are simply a byproduct of good risk management. If you learn to analyze the market in terms of risk, you will be much less affected by the random movements of market price action and focus only on the ones that offer better possibilities.

Marc Principato, CMT,

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