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How FOMO Can Help Your Trading

I recently posted an article about how we can use our greatest weaknesses to become valuable strengths.  Here is a dramatic example from a money manager I've been working with.

The portfolio manager suffered from that common malady of FOMO:  the fear of missing out on potential market moves.  Although he had rules for entering positions that carefully circumscribed risk and reward, he would see the market moving away from his ideal entry point and, fearful of missing out on the opportunity, he would chase the short term movement.  All too often that led to paper cut losses and big distractions during the day.

Now, of course, the usual coaching strategy to help this person would be to mentally rehearse scenarios that trigger FOMO, along with the "best practices" for managing such market opportunities.  Those visualizations would be accompanied by stress management techniques to minimize the anxiety that is a typical part of FOMO.  Such an approach can be quite useful.

But suppose we view FOMO as a potential trading/investing strength!  Perhaps the FOMO is simply an unhelpful channeling of a positive drive for achievement and performance.  Rather than try to eradicate the FOMO, how could we channel it in more constructive directions?

The way we did that was by transforming FOMO into FOMOP .  FOMOP, we decided, was a fear of missing out on one's process.  It is a fear of losing the process orientation that has accounted for long-term success.

To deal with FOMOP, the manager actively recounted, during preparation time, instances in which deviations from good process led to losses.  He specifically looked for scenarios in the upcoming day's market action that could lead to process breakdowns and prepared for them as potential landmines. He actually cultivated his fear; he didn't try to overcome it.  He wanted to be *appropriately* fearful of losing discipline, just as, say, an alcoholic might be appropriately fearful of relapse.

As a way of gauging progress, he graded himself at the end of the day purely on process grounds:  how well he generated ideas; how well he structured trades based on the ideas; how well he managed those positions and their associated risk; etc.  The goal was to achieve consistently high process scores at the end of trading days, whether those days had positive P/L or not.

The interesting finding has been that FOMOP works!  Indeed, this portfolio manager has shown dramatic improvements in the rigor of his trading (he executes his own positions) and investing.  This has translated into a better mindframe and, most critically, into improved absolute and risk-adjusted returns. Instead of fighting his fear of missing out, he has channeled it in a way that improves his trading.  That fear came out of a positive drive for performance; it wasn't something to be battled and eliminated.

What if most of our weaknesses are simply strengths channeled the wrong way?  How might it help our trading, our mindset, and our relationships if we can find the positive drive behind the weakness and use it to fuel one of our strengths?

Further Reading:

Turning Weakness Into Strength

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