“The key to trading success is emotional discipline. If intelligence were the key, there would be many more people making money trading,” is a phrase by Víctor Sperandeo, famous Wall Street trader and, among other works, author of books on trading. . Ray Dalio, multimillionaire and one of the largest hedge fund managers, also thinks along these lines, believing that “by controlling your emotions you begin to see things at a higher level”.
In the world of the markets, there are multiple emotions, feelings or impulses, beyond fear, greed or impatience, that can arise at any time when someone is confronted with them. For this reason, it is essential to keep a cool head when deciding to invest. “Financial markets are designed to transfer money from the impatient to the patient,” says one of Warren Buffet’s famous phrases.
With all this, there are two concepts that can be applied to the field of investments, as is often the case with cryptocurrencies, or also in the economy or in any facet of life. The first of them is FOMO (Fear Of Missing Out, that is, “fear of missing out” or “fear of letting it go”) and the second is FUD (Fear, Uncertainty and Doubt, in Spanish, “fear, uncertainty and doubt”). The common thread of these emotional and fear-based factors affect traders in the cryptocurrency market (and other markets as well).
The fear of missing the boat can cause poor decision making by the investor
FOMO refers to the impulse that many feel to stay out of, in this case, a purchase or investment. And this is something that is happening with cryptocurrencies. That fear of missing the boat can cause poor decision making by the investor. It causes the investor to enter the markets at the wrong time because he sees the price go up and up, and then he starts chasing it. It is something that should never be done, but when emotion takes over reason even the most childish mistakes appear as if by magic.
People who indulge in FOMO underestimate the regrets of making a wrong decision. This concept, extrapolated to other behaviors or situations, means that, for example, we watch a series on a television platform in one go so as not to get lost in the conversations when commenting on it, that we go to the trendy restaurant to upload our opinion to Tripadvisor, or that we want to be the first to get hold of that new gadget.
FUD is an unethical practice, linked to post-truth and fake news
Instead, FUD, which could be defined as the opposite face of FOMO, happens when controversial information is released that sows fear when investing, not only in traditional markets, but also in the field of cryptocurrencies. Something that can be seen in the movie ‘Mary Poppins’, when little Michael claims his two pence from the bank and the rest of the customers listen to him. His insistent claim makes the other customers believe that the bank has gone bankrupt and he refuses to return their savings. It is a clear example of how fear, uncertainty and doubt about not recovering their savings make all customers demand their money back.
FUD is an unethical practice, linked to post-truth and fake news, and is currently used, for example, in marketing and politics. The first time this term was defined was in 1970, when Gene Amdahl left IBM to set up Amdahi Corp and compete with them. At the time, IBM salespeople were busy instilling fear, uncertainty, and doubt in customers who might have in mind consuming Amdahi Corp. products.
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