There are two psychological skills you need to own in order to become a successful investor: avoiding misinformation and controlling emotions. These two skills are important since, in crypto investment, you are going to see a lot of FUD and FOMO behavior.
So what are FUD and FOMO? Let’s discuss this in this article:
What is FUD?
FUD stands for Fear, Uncertainty, and Doubt, which is a strategy that aims to discredit the value of digital assets by spreading misinformation.
The goal of someone spreading FUD is to instill fear in the masses. From that, the spreader of FUD / negative news may profit from lower price.
There are two ways the FUD spreader can profit if the price of an asset falls:
- The FUD / negative news spreader has entered a short position, where he has borrowed an asset and sold it on the market. If the asset price falls, he can buy it back at a low price to cover the loan.
- FUD spreaders know an asset has good potential, but the current market price is already high. By spreading negative news and dropping the price, he can buy this asset cheaper.
What can you do to avoid FUD?
You can read news and references from various sources when the crypto price drops to avoid FUD. By reading reliable sources, you have a deeper knowledge and a more adequate price analysis. With knowledge preparation, it will help you from panic and selling your crypto when the price is too low.
What is FOMO?
FOMO stands for Fear Of Missing Out. Actually, this term can be found in everyday life. However, in cryptocurrency, FOMO is an emotion that causes investors to buy assets for fear of losing profit opportunities when crypto prices increasing.
What can you do to avoid FOMO?
You can avoid FOMO by analyzing and calculating the risk of buying digital assets every time, so you avoid buying assets at prices that are too high. For example, if you believe an asset has a bright future, but the price is too high, don’t put all your money in at once to buy the asset at an expensive point. It is possible that the price of these assets can fall, and a routine saving strategy is safer.
From this article, it is obvious that we can’t trade based on fear. From the two terms above, you can learn how to avoid trading based on fear. If you start seeing FUD, pay attention to price analysis again, and adjust it to your trading strategy. Then if there is a sense of FOMO when a coin seems to have potential, study the chart of that coin again and throw away emotions when you are about to trade.