What is a factor FOMO? Well, it’s the fear of missing out, and it drives a lot of decisions. Following the crowd… Many of these decisions are quite wrong. This was one of the main reasons you saw people buying toilet paper rolls last year!
It’s not that they need more toilet paper rolls, it’s that everyone is buying what motivated these people to make this decision. They floated past the aisle and thought, well, if I don’t buy one, then I won’t have them, because they’re all gone, so I’m going to buy! You can also see how this kind of thinking manifests itself in the financial markets and in a wide variety of sports. However, the funny thing is that it can lead you into a trap. It’s easy to get involved in something. You see it in general circumstances where people hit on something and then people don’t want to miss it. So they end up getting caught up in the tripping effect.
What is a footboard effect?
Well, everyone does it, so I need to do it! People just lose all judgment as to whether it actually makes sense to do it or not. “But I could make money off of it…” When we look specifically at Betfair’s financial markets and trading markets where money is involved, this is exacerbated because all of a sudden you’ll be afraid of losing money on it too. You’re afraid to get in, but you’re also afraid to get out, and it’s just a mess. This describes why many people struggle with trading, but also perfectly describes exactly where the best points in the market should be, where you can use all this to your advantage. So let’s take a look at exactly how this happens, why it is, and more specifically, what can we do about it?
How to define a FOMO theme
There are several ways you can use the factor FOMO to the fullest, and the first way you’re going to look when the day develops a particular theme. By theme, we mean a recurring pattern that occurs throughout the day that triggers the factor FOMO. It stirs up the psychology a little, and then you can foresee how it will manifest itself in the future.
The clearest example I can give you is when a jockey wins a couple of races or a coach and on that basis people start betting on the next race. So people add two and two, get 325.6, and use their last two races as a base to bet on the next race. This is because you noted something that happened and decided to project that pattern. Usually when you get even a little support in the market, people see the support, encouraging them to support everything like a snowball.
To take advantage of this, follow the development of the day, because this can give you a clue to how the future race may unfold. Suppose there is a horse with very strong support in the first race and that horse is losing or winning, and then you start to see support activity in the second race. If you notice a repeating pattern, you can use it in terms of Betfair trading.
So when you see significant activity in a market, you may find significant activity in the next market. Again, if the favorite in this race gets strong support, then you will probably start to see activity in the next race from now on. These themes develop throughout the day and may have different origins.
As you begin to understand a topic, your role as a trader is to begin to anticipate how it will play out in the next race. This is the first way to develop a factor FOMO and how to use it. However, there are other ways, more subtle, and, curiously, they go against this. Imagine that you enter the market and see that it is in a long trend, and you think, should I join it? The interesting thing is that if there is no theme behind it, you can adopt a strategy that counters it. How now to counter what is in a strong trend? Well, the interesting thing is that if you get, let’s say, a night of gambling or some steady support for something. There’s usually a price at which people don’t want to support it anymore, especially if there’s no current topic behind it. So if a series of gambling is going on, it counts as a topic. But if it’s just an isolated runner that starts to float, or maybe it drifts hard, it can run both ways, then you can look at countering it from the other side. Or maybe there isn’t much time left in the market for you to follow this trend for a very long time?
Learn how to catch a wave
You will find that when people enter the market, they enter the market looking at the price, which then becomes their anchor point. If the price starts coming in from that particular point, people notice that those prices come in to believe they have to do something. They may also feel the urge to see some sort of confirmation? As the price goes down, this confirmation gets stronger to the point where they feel compelled to push the button. Now, at this point, the price starts to come back in the other direction. I’m sure you’ve seen it all because I’ve experienced it too. How frustrating it is when you do one thing and the market seems to be doing another. When talking to people about trading, people complain that the market is fixed or always seems to be doing the opposite of what they expect, but this is the prevailing trend in any trading market.
Thus, the moment a person gets involved in the market is usually at the very bottom of that particular trend. At this point, people who are in the market much earlier decide to start getting out of it. Hence, this person will hold and hold as the price returns in the other direction. This starts to create a potential loss for them, and at some point the pain becomes too much. Usually this point is an anchor point they have seen in the market, so they set aside their position at that point. Guess what’s happening now? Well, then the market comes back in the other direction.
If you encounter this on a regular basis, the market will bully you, you will seal your trade incorrectly and succumb to the factor FOMO.
Going against the trend can benefit you
If you’re in the market and you don’t see the main theme and you feel like you’re too late for the trend to develop or catch it, consider going against it. You will see me do this in various videos where I catch the market at the top or bottom of a trend using this characteristic. Generally speaking, all the smart money was invested much earlier, then we reached a point of sort of depletion where it suddenly becomes worldly value or people who had big positions start cashing it out.
What I’m trying to do is stop this intense support activity so that the market fluctuates and stabilizes at that particular point, and then it’s near the bottom of its trading range. This is the moment when I enter the market to try to ride him when he leaves. I do this for two main reasons: People at a much higher level, when they see that prices have stalled, will start to close their positions because they want to maximize their profits. They are afraid to miss this profit. People who are in a difficult position, who, in fact, entered too late, will begin to avoid losing. They fear a much greater loss, so they will relinquish their positions. Very often you will get a great reversal at this point in the market. Thus, it is slightly different from the first example we looked at, but relies heavily on the same basic psychological characteristics.
Fear of missing something genuine. It’s part of human nature, and it’s one of the trends that I see repeating itself endlessly in the market. It can take several different forms and for several reasons. In the past, I have written articles on these topics and the second version FOMO, in which people mostly arrive too late and the market starts to turn around, and this trend has basically come to an end. So the fear of missing out is that it is based on scarcity and the fear of loss. You can determine this in the marketplace; you can anticipate this particular scenario and benefit from it. If you apply some of this knowledge to the way you interpret and view the market, I am sure you will take advantage of this opportunity too.