The Faces of "Fear of Missing Out"

[Rande Howell 10]

The "Fear of Missing Out" drives many of the fear and impulse-based problems that traders experience in the performance of trading. But what does it look like? In what areas of trading performance does it manifest?

 

Have you ever seen a set up that looked too good to pass up and you grabbed it impulsively before it could get away, even though it was not in your trading plan? Have you even been seized by hesitation, looking for more and more confirmation before entry and felt the pressure of opportunity building up to act until you jumped in the trade just to get out of the discomfort? Or, have you ever been in a trade, got unnerved by the initial flux, and gotten out of the trade with only a small profit before anything else could go wrong, and the trade went on to your target?

 

Fear of Missing Out as Greed

 

These are the primary faces of the "Fear of Missing Out". Notice that this particular fear can show up in the form of fear or greed or a combination of both. In the first scenario greed drives the "fear of missing out". The trader sees opportunity arise outside of the parameters allowed by his trade plan. The greed to seize opportunity (or the desire to acquire) hijacks the trader’s discipline and impartiality.

 

This is seen in over-trading, impulse trading, and revenge trading. When discipline slips, the “desire to acquire” motivation trumps clear-headed thinking. Greed, as a driver of motivation, has its origins back in our evolutionary history. It is neither good nor bad. It is simply an emotion that evolved over the eons to help us survive, and then it became instinctual. In the times before agriculture, no one knew from where or when his next meal was coming. So when the opportunity arose, survival dictated that you take advantage of a situation – whether you were hungry or not. Taking more than you needed, even at the expense of others, helped ensure survival in leaner times. So it became wired into our biological repertoire.

 

This survival strategy was embedded long before man had developed a psychology as we understand it today. Greed evolved into a survival strategy as an opportunistic way of taking advantage of circumstance. In a breakdown in the learned discipline required of trading, greed (in the form of the "fear of missing out") can trigger and take the trader out of the impartiality so necessary for consistently successful trading. Without emotional state management skills, a trader will continue to have his trading mind hijacked by primitive impulses rooted in survival.

 

Fear of Missing Out, a Mixture of Fear and Impulse

 

In addition, a mix of fear and impulse produce tension and psychological discomfort to a point where a trader jumps out of his hesitation and into a trade late. The pressure to act builds as he watches the trade in order to get more and more confirmation, and he is held by his hesitation from entering the trade. Finally the emotional pressure compels him to act impulsively just to get out of the discomfort fostered by the opposing drives of desire of avoiding uncertainty and the desire to acquire. By the time he enters the trade, the real opportunity for this trade has passed and the trader is stuck with having bought high.

 

This timing problem is as much a psychological management problem as a skill of timing of the trade itself. The fear of uncertainty or loss has kept the trader out of the trade even though it meets his criteria for a trade entry point. He keeps looking for more confirmation as tension to take advantage of opportunity builds. The need to take advantage of a set up is not being driven by disciplined impartiality; but, rather, the need is being driven by a going concern that he will miss out on the opportunity. The mix of the fear of uncertainty and the fear of missing out has collapsed the capacity of the trader to trade from disciplined impartiality.

 

These are the trades that cause the trader to wonder when reviewing his trades “What on earth was I thinking?” The point is that he was not thinking. He was reacting and his thinking mind was clouded with opposing biologically-based motivations. In the resulting confusion, poor trading decisions arise from the lapse in internal discipline.

 

The Fear of Missing Out as Fear of Losing Profit

 

In the third example, the fear of missing out shows up purely as a fear of losing profit. This also represents one of the most common risk and trade management situations in trading. A trader enters a trade and experiences a period of flux as his trade bounces around. It’s below his entry point and then it spikes above his entry point. Then it takes a quick dive back into negative territory. An undisciplined trader is unnerved by this behavior and is triggered to fear. Now the trader is managing the trade from a position of "fear of loss". And when he sees the opportunity to take a small profit and exit the trade (remember he is thinking and acting from fear now), he pounces on the opportunity. Relieved of the psychological discomfort, he now watches the trade go to the target. But the fear of missing out (on a small profit) has done its damage.

 

Notice in this form of the Fear of Missing Out that there are two “acts”. It is the emotional and psychological management of the trade entry and the resulting flux that unnerves the trader - and he never recovers from this initial moment where his psychology is coming face to face with his beliefs about his ability to manage uncertainty. Once he is past the initial flux and the trade begins to trend, his trading mind is already hijacked by his fear of losing and he grabs at the first chance of taking profit. In the intensity of the moment, this seems like a victory. Later, when his brain and mind has calmed down and he is reviewing the trade, the trader realizes that fear immobilized discipline, impartiality, and a planned trade.

 

Beliefs and Emotional Regulation Hold the Key

 

A trader’s beliefs about his capacity to manage uncertainty to his advantage is at the core of the "fear of missing out". If he holds a core belief that he is powerless in the face of uncertainty or inadequate to manage uncertainty, his trading account will bear this out. If this is the belief, the trader is driven to produce the feeling of certainty (which is impossible in the market) rather than to build a mindset designed to manage the probabilities in uncertainty.

 

Trading becomes a mirror into the organization of the self that the trader brings to the management of uncertainty. It will show you whether you are creating your life out of the avoidance of fear or the management of uncertainty. Trading and performance in trading, with Mindfulness developed as a skill, becomes a mirror that reflects the beliefs that actually color the trader’s perception of the trade.

 

As the trader journeys into trading, he learns that he has to face his fears and the self-limiting beliefs operating in the background of his awareness. The "fear of missing out" is exposed in the act of trading, but it will have been in operation in other domains of the trader’s life. Eventually, the trader embraces the assumption that all life is uncertain and that certainty is not possible long term. The threat is not external – there is no Holy Grail “out there”. You are the Holy Grail. It is the mindset (your beliefs about your capacity to manage uncertainties) that you bring to the uncertainty of trading (and life) that create the difference.

 

With the "fear of missing out calmed" and a disciplined and impartial mindset established, you realize that it is not about winning or losing a single trade. It is about the mindset that you bring to the performance of the trade. Winning and losing disappear in the moment. Freed from fear, you trade what you see and not the crazy conversations going on in your mind. And your "fear of missing out" leads you to the very place in your psychology that you needed to re-organize.

 

Rande Howell

www.tradersstateofmind.com

[SIUYA 11]

Rande - nice article - if anything this applies to me as one issue I know I often face.

 

It boils down to overtrading

 

Whether because I used to have the fear of missing out due to inbuilt deep seated evolutionary reasons, mother and father issues, or the fact I started trading as a market maker whereby you ideally had to do a lot of trades and create opportunity, or I had a generally philosophy of saying "yes" to everything, or maybe its just plain boredom, or a self destructive "we all get what we want out of the markets reality" - who knows - its probably a combination of all of them

 

Either way - in working on solutions - such things as process, practice, planning - having feedback from others, automating processes, getting up and walking away - not watching the screens when a trade is on, not watching your PL, eliminating anxiety by having other hobbies to do, drinking , improving focus on what is important in the market (context, as opposed to the minuscule issues of worrying if the global cabal of international conspiracy theorists will tick my stop to the cent), then these are just something traders have to work on....that suit them.

 

Remembering () its not about something being right or wrong, or for reasons of why in first place (this might help as it could deal with the reasons in the first place)-

you want things that work.....whatever the reasons. (if rubbing you lucky rabbits foot eases your fear then great - nuts, but fine)

 

just a bit of topical reading as well.

Life can be like a balloon when everyday problems blow up in your face

[MightyMouse 12]

The fear of missing out is usually a problem that traders assign to over trading and getting caught the wrong way too many times, resulting in unwanted losses. The day ends and they feel remorseful for their poor behavior. However, if the net of their activities result in getting caught the right way more times than not, then there is a fist pump in exaltation of their trading brilliance.

[bim1 10]

Fear of missing out.

Impulse.

Raw Emotions , as Market Price fluctuate.

 

" Don't make permanent decisions on temporary emotions "

 

Look at the market structure, and the larger picture.

Consider your time frame and your risk tolerance.

Think of your possible Target Exit and Stop Exit price.

Would you consider adding to your position?

Would you scale in / Scale out of a trade gradually instead of all at once ?

 

If you are prepared with your plan, you would not be prone to

" making permanent decisions on temporary emotions " as markets moves in real time.

 

Good Luck.

 

Glenview Day Traders Community | Facebook

[koyasan 10]

Just maybe the fear is more recent than our evolutionary past and has more to do with an ever decreasing capital account. Try telling a gambler he has to face the fear and keep betting. I suspect that for many traders trading is akin to gambling and the result is consistently finding themselves on the wrong side. Fear can be controlled, not by some positive thinking or self talk but by the confidence that comes with skills, knowledge and experience and seeing the evidence in an ever increasing capital account.

[Rande Howell 10]

  MightyMouse said:

The fear of missing out is usually a problem that traders assign to over trading and getting caught the wrong way too many times, resulting in unwanted losses. The day ends and they feel remorseful for their poor behavior. However, if the net of their activities result in getting caught the right way more times than not, then there is a fist pump in exaltation of their trading brilliance.

 

Euphoria is just as dangerous as fear to the trader's performance. As a feeling, Euphoria generates a certainty in the belief that the good times are going to roll on forever. Leads to alot of over-trading. What we are looking for is not just the performance (over trading), it is also the mindset that set ups the performance

 

Rande Howell

[Rande Howell 10]

  koyasan said:

Fear can be controlled, not by some positive thinking or self talk but by the confidence that comes with skills, knowledge and experience and seeing the evidence in an ever increasing capital account.

 

For sure as you see your TA grow, you have evidence to demonstrate confidence. Most folks have to learn how to reorganize their beliefs about their ability to manage uncertainty for that to happen. What I find is that has to happen first for the trading account to grow. The growth is a consequence of a changed mindset.

 

Rande Howell

[koyasan 10]

  Rande Howell said:

For sure as you see your TA grow, you have evidence to demonstrate confidence. Most folks have to learn how to reorganize their beliefs about their ability to manage uncertainty for that to happen. What I find is that has to happen first for the trading account to grow. The growth is a consequence of a changed mindset.

 

Rande Howell

 

I think we are actually saying the same thing except we might differ on what comes first. My view is that you can learn the skills set to manage uncertainty and that the demonstated evidence (being profitable) will change the core beliefs you may have had about uncertainty. This is essentially a dynamic process and contains a positive feedback loop.

 

Let's say a child wants to learn how to swim but may understandably have a fear of sinking or not being able to float on the water or depending on age may have a real concept of drowning. There is an issue of how to manage the uncertainty of what will happen when the child lifts it's feet off the bottom of a pool.....will it sink or float? Given the right coaching the child can learn what it takes to swim and then it's core beliefs about water will change.Nothing will change unless the child gets into the water and learns a new behavior. Behavior and the new experience alters beliefs.I will accept that in the process of learning to swim the child needs help on how to manage uncertainty and this comes in the form of support and encouragement and instilling confidence from the parent/instructor.

 

Of course this leads back to the issue (this is off topic) of whether or not you can split the mental coaching from the technical and given the growth of sports psychology it seems you can. When it comes to trading I think most newbies are like amateur swimmers.....teach me how to float first (the technical side) and only when I turn professional do I need or indeed can afford the mental coaching.

[MightyMouse 12]

  Rande Howell said:

Euphoria is just as dangerous as fear to the trader's performance. As a feeling, Euphoria generates a certainty in the belief that the good times are going to roll on forever. Leads to alot of over-trading. What we are looking for is not just the performance (over trading), it is also the mindset that set ups the performance

 

Rande Howell

 

Euphoria is only bad if you start losing. You can them blame it on "something". If it doesn't lead to losses, then it is performance due to keen intuition developed over years of hard work.

[Rande Howell 10]

  koyasan said:

I think we are actually saying the same thing except we might differ on what comes first. My view is that you can learn the skills set to manage uncertainty and that the demonstated evidence (being profitable) will change the core beliefs you may have had about uncertainty. This is essentially a dynamic process and contains a positive feedback loop.

 

Let's say a child wants to learn how to swim but may understandably have a fear of sinking or not being able to float on the water or depending on age may have a real concept of drowning. There is an issue of how to manage the uncertainty of what will happen when the child lifts it's feet off the bottom of a pool.....will it sink or float? Given the right coaching the child can learn what it takes to swim and then it's core beliefs about water will change.Nothing will change unless the child gets into the water and learns a new behavior. Behavior and the new experience alters beliefs.I will accept that in the process of learning to swim the child needs help on how to manage uncertainty and this comes in the form of support and encouragement and instilling confidence from the parent/instructor.

 

Of course this leads back to the issue (this is off topic) of whether or not you can split the mental coaching from the technical and given the growth of sports psychology it seems you can. When it comes to trading I think most newbies are like amateur swimmers.....teach me how to float first (the technical side) and only when I turn professional do I need or indeed can afford the mental coaching.

 

 

It appears we are in alignment. Most people come to life and to trading with inadequate skills for knowing how to change -- particularly long held beliefs that operate outside of the awareness. Good coaching is essential. In sports teams or individuals hire psychologists to integrate the technical and the mental side to act in concert with one another. It is the mind that is being designed for the act of performance. In trading it is the same. Though the skills are different to produce the performance. I work with several methodology teachers where they teach the methodology and they refer to me for performance issues. One, Gail Mercer of Traders Help Desk, is taking it a step further where the training is to be side by side. So, we'll see in about a year. It will be interesting in seeing how they work together.

 

Rande Howell

[Rande Howell 10]

  MightyMouse said:

Euphoria is only bad if you start losing. You can them blame it on "something". If it doesn't lead to losses, then it is performance due to keen intuition developed over years of hard work.

 

I just don't see many traders who stay euphoric for long. The emotion itself leads to compromised perception. I know successful traders who get euphoric after their trading day is over and they are willing to take off their game face and have a little fun. Next day, it's all business again.

 

Rande Howell

[MightyMouse 12]

  Rande Howell said:

I just don't see many traders who stay euphoric for long. The emotion itself leads to compromised perception. I know successful traders who get euphoric after their trading day is over and they are willing to take off their game face and have a little fun. Next day, it's all business again.

 

Rande Howell

 

Winning streaks can continue for a long time and then come to a grinding halt. During the euphoric period, a trader can develop a very warped sense of ego. It happens to a lot of traders who have sustained winning streaks. Richard Dennis comes to mind.

 

Understanding how much luck plays a role in your results is a good way to stay grounded in the here and now.

[lylec305 10]

You can rationalize anything. How do you expect to win unless a trade is entered? There is an augument on both sides. What happens if a trader over trades and each trade is a winner?

[Rande Howell 10]

  MightyMouse said:

Winning streaks can continue for a long time and then come to a grinding halt. During the euphoric period, a trader can develop a very warped sense of ego. It happens to a lot of traders who have sustained winning streaks. Richard Dennis comes to mind.

 

Understanding how much luck plays a role in your results is a good way to stay grounded in the here and now.

 

I agree. Tom Laundry, old coach of the Dallas Cowboys, once said that luck is where preparation meets opportunity. Bring a centered mindset to that mix and you can take advantage of the situation.

 

Rande Howell

[Rande Howell 10]

  lylec305 said:

You can rationalize anything. How do you expect to win unless a trade is entered? There is an augument on both sides. What happens if a trader over trades and each trade is a winner?

 

This isn't about rationalization. It is about the mindset you bring to the trade -- the eyes you see through and assess opportunity through. All cognition is emotional state dependent. The emotional brain makes a decision and your thinking brain produces a rationalization. Fear produces a state of mind that believes in the certainty of bad things happening. Euphoria (much like cocaine operates in the brain) produces a state of mind that believes in the certainty that good things are going to continue. A calm centered mind in disciplined impartiality is going to believe in the certainty that what ever the market is willing to give that you can take advantage of. Each mindset "sees" the market information differently. In fear, you don't trade what you see, you trade what you believe will happen based on hypervigilance. In euphoric, you don't trade what you see -- you trade with gullible anticipation.

 

As MM pointed out many traders confuse skill with luck when a streak occurs. When a trader reviews his trades (both winners and losers), he is evaluating them hopefully for consistency to his trade plan. In over trading, a trader is generally stretching his plan beyond its limits and entering trades that no longer fall within his parameters. Even if you win, this does not bode well for consistent winning over time. Of course, in fear, he never enters the trade in the first place or flips out while managing the trade.

 

The key here is emotional state management as it applies to the mindset that shows up to trade.

 

Rande Howell

[SunTrader 10]

  Rande Howell said:

.....Understanding how much luck .....

There is no such thing in this world.

 

It is the random nature of how most things happen that one cannot point to a particular reason why it did.

 

A common example, that has happened many times, is of winning the lottery with a quickpick ticket after someone else got out of the cashier line to "get one last item".

 

That other person would not have gotten the winning ticket. It was a random computer-generated set of numbers at that particular micro-second moment. So one person before or after is a completely different moment in time - no luck good or bad involved.

[MightyMouse 12]

  SunTrader said:

There is no such thing in this world.

 

It is the random nature of how most things happen that one cannot point to a particular reason why it did.

 

A common example, that has happened many times, is of winning the lottery with a quickpick ticket after someone else got out of the cashier line to "get one last item".

 

That other person would not have gotten the winning ticket. It was a random computer-generated set of numbers at that particular micro-second moment. So one person before or after is a completely different moment in time - no luck good or bad involved.

 

That seems like a great deal of luck to me for the next guy in line.

[koyasan 10]

  Rande Howell said:

 

The key here is emotional state management as it applies to the mindset that shows up to trade.

 

Rande Howell

 

A couple of points.

 

In the context of managing fear I think there first needs to be a assessment of whether the fear is a response to a real or perceived threat. Two simple examples:

Trader A.. Well capitalised account, proven plan, consistent track record but is now paralysed by fear of going bust

Trader B, Under capitalised account, ad hoc plan and inconsistent track record and is now paralysed by fear of going bust.

 

Trader A might well benefit from emotional state management from a perceived threat while Trader B needs to recognise the fear as a response to a real threat and act accordingly.

 

I also think that as a Trader I am faced with some unique challenges which leaves me vulnerable to being adversly affected by fear. If I underperform as a Trader I may not be able to pay my bills, support my family and even go bankrupt or worst still have to admit my failure and try and get a 'real job'. As a Trader I work alone and work without the everyday contact/support of colleagues. As a Trader it is a stretch of the imagination to argue there is any direct social benefit unless of course I make enough money to support a social cause. So as Trader I have to battle alone with the fear that failure comes at a high cost. Of course I would argue that I battle successfully but what we mean by 'emotional state management' is hopefully the topic of a future article.

 

This brings me to my last point and it is a general criticism of psychology articles (not personal to Rande). Like sales pitches for the 'latest and best trading system' they are good at identifying a condition, highlighting a need,describing a symptom but fall short on solutions. For solutions , just like the 'latest and best trading system' we must 'sign up' and part with real or yet to be realised trading profits. Of course if we don't we then have to manage the fear that we could be missing out on the key to success.

[SunTrader 10]

  MightyMouse said:

That seems like a great deal of luck to me for the next guy in line.

Lucky he received the random winning lottery ticket.

 

You missed the point then. :doh:

 

:o

 

Laughing with, not at you.

[Rande Howell 10]

  SunTrader said:

There is no such thing in this world.

 

It is the random nature of how most things happen that one cannot point to a particular reason why it did.

 

A common example, that has happened many times, is of winning the lottery with a quickpick ticket after someone else got out of the cashier line to "get one last item".

 

That other person would not have gotten the winning ticket. It was a random computer-generated set of numbers at that particular micro-second moment. So one person before or after is a completely different moment in time - no luck good or bad involved.

 

Please note that what you frame as what I said is what MM said. My response was Tom Laundry's observation about luck being opporutnity lining up with preparation.

 

Rande Howell

[Rande Howell 10]

  koyasan said:

A couple of points.

 

In the context of managing fear I think there first needs to be a assessment of whether the fear is a response to a real or perceived threat. Two simple examples:

Trader A.. Well capitalised account, proven plan, consistent track record but is now paralysed by fear of going bust

Trader B, Under capitalised account, ad hoc plan and inconsistent track record and is now paralysed by fear of going bust.

 

Trader A might well benefit from emotional state management from a perceived threat while Trader B needs to recognise the fear as a response to a real threat and act accordingly.

 

I also think that as a Trader I am faced with some unique challenges which leaves me vulnerable to being adversly affected by fear. If I underperform as a Trader I may not be able to pay my bills, support my family and even go bankrupt or worst still have to admit my failure and try and get a 'real job'. As a Trader I work alone and work without the everyday contact/support of colleagues. As a Trader it is a stretch of the imagination to argue there is any direct social benefit unless of course I make enough money to support a social cause. So as Trader I have to battle alone with the fear that failure comes at a high cost. Of course I would argue that I battle successfully but what we mean by 'emotional state management' is hopefully the topic of a future article.

 

This brings me to my last point and it is a general criticism of psychology articles (not personal to Rande). Like sales pitches for the 'latest and best trading system' they are good at identifying a condition, highlighting a need,describing a symptom but fall short on solutions. For solutions , just like the 'latest and best trading system' we must 'sign up' and part with real or yet to be realised trading profits. Of course if we don't we then have to manage the fear that we could be missing out on the key to success.

 

Trader B hasn't developed a trading system that isolates the problem to his psychology of performance. He really needs to be in trading for methodology. Psychology is pretty much useless until that happens.

 

From the retail traders I work with there is a powerful motivator in their trading -- the desire to provide for their family. That is their cause. They love the game of trading, but their motivation is as provider. If trading is about proving the self by mistaking self worth with networth, they are attuned to a destructive god or what Judeo-Christian tradition calls mammon. Trading can become a path to seek deeper meaning of the self through social causes -- it really depends on the trader's journey.

 

Your last point about psychology articles. I hear you. And I am guilty as charged. The focus on fear gets people's attention. But, as you observe, what happens after that. Articles and books open a cognitive door that we can see through. Changing the beliefs that you bring to the management of uncertainty requires heavy emotional lifting for biological and psychological reasons. That is going to require motivation and urgency on the part of the trader that goes well beyond holding a simplictic belief that change can occur by changing mind rather than our emotional nature.

 

I have backed away from writing about the mechanics of change because I use an archetypal language to help develop inherent talents. It's pretty alien to many people's sensibilities. Maybe what I ought to do is write an article in that domain. It would give a different kind of food for thought. At the bottom through is the fact that it requires work to change heavily embedded beliefs.

 

Rande Howell

[SunTrader 10]

  Rande Howell said:

Please note that what you frame as what I said is what MM said. My response was Tom Laundry's observation about luck being opporutnity lining up with preparation.

 

Rande Howell

Yes true.

 

I was having browser issues that day or something and realized after the fact - too late to edit.

[koyasan 10]

  Rande Howell said:

 

I have backed away from writing about the mechanics of change because I use an archetypal language to help develop inherent talents. It's pretty alien to many people's sensibilities. Maybe what I ought to do is write an article in that domain. It would give a different kind of food for thought.

 

Rande Howell

 

'Archetypal language' may be a new idea for many traders but we are all familiar with strugggling with our demons (fear,greed,self worth,doubt etc) and we need all the help we can get to develope our 'inherent talents'. Personally I like variety in my "food for thought" so I look forward to your next offering.

[zdo 20]

jmo Rande, but an article giving a left brain fly by of how you are using 'the archetypes' would add knowledge but no understanding for most and would actually damage the chances many would ever go through the 'progression' - whether guided or self directed... again just my impression, but

I'd advise restraint ...

...your name is Rande Howell - not Randy Howl

[zdo 20]

  Quote

Trader A.. Well capitalised account, proven plan, consistent track record but is now paralysed by fear of going bust

Trader B, Under capitalised account, ad hoc plan and inconsistent track record and is now paralysed by fear of going bust.

 

Excellent distinction

In my own head, I like to tell myself that with my experience

1 I could start over from nothing / 5,10,20K – but in reality I would be jumping right into the middle of Taleb’s pool…

2 I could modify and adapt my “plan” to a small scale – and actually I probably could… but it would still be crippled by sizing limitations… this part would be more like jumping into the safe, shallow end of Taleb’s pool

3. that my “track record” means something – but in reality, at small scale so much can go wrong with one or a small series of trades and the consequences are much more ‘important’… deep end of Taleb’s pool

 

...net net I'd be right in the middle of Talab's pool with all the other 'jumpers'...

 

re: luck, fortune, etc… are we, as Taleb says, fooled by randomness? Yes AND no. Those 3 out of a 100 that thrive in Taleb’s pool are ‘lucky’ (it just takes a few ‘lucky’ outlier trades) AND they also bring a differentiated emotional ‘field’ to the game to 'manage' those wins and everything else that occurs…