When you hear that a stock is doing really well, you might feel like you’re missing out. This feeling is often referred to as “FOMO,” or the “fear of missing out.” It can make you want to buy the stock quickly, even if you don’t know much about the company or the stock market.
FOMO can be bad for a few reasons.
A big danger that FOMO brings is that it can make people pay too much for a stock. If a lot of people are buying a stock because of FOMO, the price can go up quickly. This means that people who buy later might pay more than people who bought earlier.
To make things worse, you might be purchasing near the top of a climb. If you don’t time your purchase well, you may start buying just before the price drops. That’s a great way to lose money!
Also, FOMO can make people buy stocks that are not good investments. If people are buying a stock just because they’re afraid of missing out, they may be putting their money in a bad stock. They might even be purchasing what’s called a “pump and dump,” which is when a stock price is artificially driven up so a scammer can make money. Trust us. You don’t want to be left holding the bag when the scammer jumps out!
To avoid FOMO in stock trading, it’s important to do your research before buying a stock. This means looking at the company’s financials, learning about the industry, and considering whether the stock is a good value. If you’re day trading, make sure you know the support and resistance points of the stock before you get into it. It’s also important to have a plan and stick to it. Don’t let emotions control your investment decisions. That’s a surefire way to go broke!
