Hello fellow Newbie Index traders, my name’s Chris and this is the first in a series of blogs I’ll be writing about my experiences on Football Index. This week I will be talking about the effects of FOMO on trading!
I didn’t come into this totally blind, I have had a bit of experience investing on the ‘real’ market and continue to do so, mostly successfully…! I joined Football Index in late April 2018 because it was too good an investment opportunity to miss out on. However, although previous experience has been helpful and aided me making a reasonable profit so far (just over 16% ROI) as a semi-passive trader, I have still made some big Newbie errors. Therefore I felt it was my duty to assist the many other FI Newbies in our quest to make some extra beer money!
I thought the first topic of conversation would be to do with FOMO – Fear of Missing Out – which seems to take many Newbie casualties in their first couple months. FOMO is so effective at costing Newbies money that FI themselves felt the need to add it to their help guide as a reason NOT to trade, I thought I’d go into a little bit more detail for you all and offer a way of dealing with the aftermath of trading through FOMO.
An example of FOMO affecting myself was when I made arguably the worst trade so far in my time on the Index… For those of you who know Timo Werner as a football talent you will be aware of the massive potential that this player has. As I saw the players price sky rocket through the mid £3 range up to £3.90, £4.00, £4.10 all the to £4.20 I thought “Hey, I love this player, he has so much talent, look at these people making money on him, surely I can do that as well!!”
As soon as I bought Timo Werner at £4.20 for 10% of my portfolio the players price started to fall… “What the heck!?” I was thinking, the guy is going to be top quality, he has been a solid PB earner this season and his quality has not suffered at all. There is NO logical reason for Werner’s price to be crashing… By this time his price had fallen to £3.80, and his price, although temporarily rising again to £4 pre-world cup, has continued to fall over the course of the last couple of months to his current price of £3.23.
However, fortunately for me, I haven’t actually made a loss on Werner… yet. How can that be Chris? I hear you saying. Well until I sell a single share of Timo Werner’s FI stock I have not lost a single penny. This is why FOMO can kill a Newbies portfolio. It isn’t the act of buying that does it, although buying a player after a sharp inflation is not recommended as that always leads to a sharp decrease once traders start selling high. It’s the act of selling, or panic selling on the way down that costs the Newbie and experienced trader alike.
If like me you were a total muppet and bought Werner at £4.20 on the back of a sharp inflation in price, you likely would have started to panic as his price began plummeting. Many a Newbie would have looked at this and thought “Uh Oh, better sell him quick otherwise I could lose loads of money”, but by selling you have locked in your loss.
There are two alternative approaches that can stop you from becoming a casualty of FOMO. First is to HOLD. This means doing nothing with your position on that player, don’t buy or sell, and just wait for his price to climb back up to where you went in on him. Or you can BUY the dip.
Buy? Sounds daft to buy a player who’s price is plummeting. But think about, there’s a reason we bought Werner in the first place remember, regular PB winner, young talent with massive potential etc. Those factors are still true. Okay he has had a bad World Cup and his price is now as low as £3.23, but because I have kept buying his fall my average share price on him is now at £3.93, still not great I’ll admit, but it’s better than £4.20.
Werner’s price is currently as low is it can get (hopefully) after that abysmal World Cup showing by Germany, unless he has a catastrophic injury. Therefore by not selling and actually buying his fall, I have put myself in a position to profit this coming season off of what was probably one of the worst trades in my FI history. FOMO no more, buy and hold, the Index is currently always rising which is what makes it the best investment in town. Be brave fellow Newbies, I hope to see you all next week for my next Newbie Blog!
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