FOMO Fallout And Why Consistency Is Everything

The market’s hot streak is alive and well at 10 green days and counting, but I’ve got it beat at 17!

Although I’m happy to be up $15,000 net profits over the past four days between my regular and IRA accounts, I also let some bad habits creep into my trading that made the week of gains bitter-sweet. Although I’m on pace to nearly double my weekly goal of $10,000, I also lost half that much in my biggest loss of 2019 by trading too aggressively as a result of FOMO.

The FOMO (fear of missing out, for the unaware) first struck on Monday when I took what ended up being a small trade in MBOT, about $380. I had seen the stock gapping up almost 80 percent before the bell on my premarket scanner, but was a little skeptical. The price died down in the approach to the open and it just seemed like the potential for a breakdown was too high to jump in immediately.

Turns out, that was the right move. It eventually managed to squeeze back up above its premarket level and I jumped in at the break above that for a scalp of about $0.05 per share for roughly $90. I got in again after the pullback and scraped a little less than $300 in the break above the high.

Overall, it was a solid, if underwhelming trade. And, although it had its best move of the morning just a few minutes later, I had already moved on.

Later that day, after I stopped trading (in fact, if you watch the midday market recap for Monday, you can seem me mournfully describe the action), MBOT continued higher at 10:40 and just kept climbing. It reached a daily high of $10.48 from it's prior day close of $2.40.

Watching that video now, I should have known I couldn’t trust myself to make a dispassionate trade in MBOT on Tuesday when it continued moving higher. Keep in mind that by Tuesday the stock was trading up 70 percent at over $16 a share, way above my usual price range.

I took four trades in it that day, three in my regular cash account and one in my IRA account. The IRA trade was a solid, early entry scalp for $1700. Then, as MBOT was approaching the break of $18, I made an aggressive move for 6,000 shares. The chart pulled back, recovered somewhat, and I got out for a loss of $5000. I made up some of it in my last trade, but still lost about -$2,000 net in MBOT.

That marks my worst trade of the year, and there clear reasons why it played out as it did. For one, although I started trading MBOT by getting a nice scalp in my IRA, I shouldn’t have forgotten the price point and the risks inherent in being too aggressive with a volatile stock that’s already trading way above my preferred range.

The other reason I was bound to mishandle MBOT is more psychological. On Monday, I was still looking at the MBOT chart like a trader, even after the move had happened. But there was a reason I wasn’t trading at that time. I trade the open for anywhere from 10 to 40 minutes, That’s my ideal trading window and it’s when I make my most successful trades. MOBOT’s 10:40 move, while not too far outside my average trading time-frame, didn’t happen while I was trading. I have to trust myself that I had a good reason for that and not dwell on it in the next session where the setup was entirely different.

While it’s almost impossible to switch off that impulse to constantly relive the best entry and exit points on a chart you're not trading, it’s an impulse that I and other day traders have to fight. Remaining consistent and not chasing fantasies is the key to being a successful trader.

So, a piece of parting zen to keep in mind for the week ahead: You don’t lose money by not trading today, but you do lose money by trading yesterday.