Trading in financial markets can be difficult, particularly when statistical analysis is involved. Market volatility, unusual price drops, and other threats make it much more challenging. It doesn't matter if it's shares, cryptocurrencies, or other tokens. To benefit from trading, an investor must have a high degree of knowledge and patience.
Different traders have been playing with various trading strategies in order to make money in the financial and crypto markets. FOMO and Momo trading are two of the strategies available.
What is FOMO or Momo? How do they function?
FOMO Trading
FOMO (Fear of Missing Out) is a tactic in which a person enters a situation without worrying about the consequences. FOMO is a trading technique in which an investor joins or exits a market due to a feeling or fear of losing out.
Every trader, both in the conventional financial system and in the crypto-system, suffers from FOMO. Investors do not want to miss out on potentially lucrative prospects.
As a result, FOMO trading is popular today in a world where news spreads rapidly thanks to social media. When an investor sees other investors making substantial profits in investing, he or she aspires to produce the same performance. As a result, they go into the market with overconfidence and unreasonable expectations.
FOMO is often affected by common human emotions such as greed, fear, and envy. The following are the most common symptoms of FOMO:
When a trader chooses to perform a trade or enter an individual market, they do so because they observe other traders entering the market in a certain pattern.
Greed in trade refers to the ability to make substantial profits in a short period of time. A trader motivated by greed would often enter the market without performing extensive analysis in order to benefit from a current situation.
Market volatility—especially in the crypto world—financial markets are extremely volatile. A coin's value will surge in as little as an hour. As a result, many traders want to take advantage of the existing market conditions.
When other investors have a string of long winning streaks, they encounter FOMO trading. Following a good investment, the investor searches out another asset that many people feel is suitable and invests in it.
Losses also lead investors to undergo FOMO. When they lose money in one investment, they want to get their money back as soon as possible, so they make investment decisions based on FOMO feelings.
FOMO trades are often caused by the effects of social media and news rumours.
Momentum Trading
Momentum trading is a form of investing strategy used by traders who want to benefit from increasing asset prices and short-term market volatility. Many investors tend to purchase low-cost securities and wait for them to grow in value. Momo, on the other hand, is almost the polar opposite.
According to experts who have used the Momo technique to invest, buying tokens at high prices and selling them at even higher prices is a simple way for an investor to make more money.
In Momo, an investor mainly searches for rising-value securities, buys them, and then waits for the securities to hit their peak value, at which point they sell them. A Momo investor is only interested in short-term market fluctuations and up-trends.
Momo traders must be highly alert in order to assess the best time to buy or sell. The aim is to take advantage of the peak earnings. Momo trading is a continuous mechanism in which an investor recognises a rise in the value of a coin and invests in it.
When experienced traders leverage Momo, they can see higher returns; however, it is not easy for beginners. An expert will decide when it is best to enter and exit a market position.
Among the features of Momo trading are the following:
The Momo trader is keen to spot price spikes and volatility episodes and seizes the opportunity.
Following the sale of one bond, the investor immediately starts searching for new securities to invest in.
Market leaders are Momo traders. They tend to herd the investment by entering the market first, taking advantage of the early profits, and then exiting quickly.
Unlike FOMO traders, who enter a market by joining the herd, Momo traders weigh the risks before investing. A Momo investor who does not use appropriate risk hedging strategies could lose money.
The investor must decide when is the best time to enter the market and when is the best time to exit. Also small delays can result in major losses.
FOMO Trading versus MOMO Trading
Despite the fact that both FOMO and Momo traders want to benefit from market fluctuations, the former tends to track human emotions whereas the latter prefers to do some study.
The FOMO trader does not perform market research; instead, greed, envy, and fear influence their investment decisions. FOMO traders are usually risk averse, so they exit the market when price increases are small.
Momo traders, on the other hand, benefit from market fluctuations, but they tend to be market leaders rather than obey other traders. They don't make choices based on emotion; instead, they use statistical analysis. The investor buys rising-value tokens and sells them when they reach their height.
Between FOMO and Momo, it's obvious that a serious investor will be better off using Momo to achieve higher returns.