Starting from FOMO
FOMO — fear of missing out — is a term widely used in the crypto community. FOMO occurs when people act on their emotions, be it a fear of losing profits or a fear of shrinking the equity of their account balance. Typically, FOMO-driven positions result in the market moving in the opposite direction. Seems like a coincidence, right?
FOMO can cause what is called Panic Buying. If this is the case in the crypto world, it is an impulsive thing for investors.
Panic Buying is a situation where the price of a crypto asset goes up drastically in a short period of time. The causes of “Panic Buys” are not always predictable, but they usually happen instantly all over the world. When the price rises drastically, more traders will be affected by this situation and buy crypto assets, so the rising price can touch the point where traders are tired of buying and start taking profits by selling at high prices.
When your trades are based on FOMO, you stop thinking logically, even though price movements seem mostly logical. you skip setup and rely on uncertain expectations of prices going up or down. Plus, if you’re lucky enough and make some good deals, you might even find the FOMO approach to be effective. So you either don’t read the indicator at all, or you just read it so that it shows what you want to see. One indicator is never enough: you should always re-research the assumptions in the market.
Another bad thing about Panic Buying is that there is no place for risk management, which is very important for professional investors. Therefore, as a trader you must avoid this panic buying.