Trading psychology: FOMO and revenge trading

What it is

FOMO (fear of missing out) is chasing a move that has already gone, usually at a bad price with no plan. Revenge trading is jumping straight back in after a loss to win it back, usually bigger and with lower-quality setups. Both come from reacting to emotion rather than following rules.

Fear causes the opposite problem: skipping valid setups or closing winners far too early.

How to spot it

• Entering without your checklist being met.
• Trading size or frequency jumping after a loss, or after a big win.

How to use it

• Set a daily loss limit and a maximum number of trades, and stop when you hit either.
• After a loss, step away for a few minutes before the next trade.
• Tag your emotions in the journal; it soon shows which feelings cost you money.

Common mistakes

• Believing you'll handle it better next time without a rule to stop you.
• Blaming the market for losses that came from breaking your plan.

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