FOMO, FUD & Emotional Trading

What you'll learn

• Emotions Move Markets
• A Brief History of Manias
• FOMO: The Fear of Missing Out
• FUD: Fear, Uncertainty, and Doubt
• The Fear & Greed Index
• Revenge Trading and Sunk Cost
• Practical Strategies for Emotional Discipline
• For Deeper Reading

Key terms

FOMO (Fear of Missing Out)

The anxious feeling that others are profiting from an opportunity and you are being left behind, often leading to impulsive buying near peaks.

FUD (Fear, Uncertainty, and Doubt)

Negative sentiment driven by scary news or rumors, often leading to panic selling. Can be organic or deliberately manufactured.

Speculative bubble

A market cycle in which asset prices rise far above fundamental value driven by enthusiasm, then collapse when sentiment reverses.

Capitulation

The phase of a downturn when the last holders give up and sell, typically near the bottom; often marks the end of a bear market.

Crypto Fear & Greed Index

A daily 0-100 sentiment index published by alternative.me that aggregates volatility, momentum, social media, and other signals; often used as a contrarian indicator.

Revenge trading

Making aggressive, impulsive trades after a loss in an attempt to quickly recover the money, usually leading to even greater losses.

Sunk cost fallacy

The tendency to continue investing in something because of money already spent, rather than evaluating it on its current merits.

Capitulation bottom

The point in a market cycle when selling exhausts itself and prices stabilize; historically marks attractive entry points but is only visible in hindsight.

Contagion

A chain reaction in which the failure of one financial institution or asset triggers failures in connected institutions, as occurred with Terra, 3AC, Voyager, Celsius, and FTX in 2022.