FOMO effect: social media and online traders

Abstract

The pervasive and omnipresent penetration of the Internet in our lives is inevitably changing our behaviour and the financial industry as such. This study discusses the psychological phenomenon known as the ‘Fear of Missing Out’ (FOMO) by elucidating its psychological basis and definition and why and how its effects are amplified under the influence of social media and social trading media. The study will demonstrate how FOMO and human interaction with social media and social trading networks can lead to irrational decision-making, financial risk-taking, and harm to personal and family wealth and psychological well-being. It emphasizes the importance of recognizing these effects and making more rational and informed choices in trading and investment to avoid gambling behaviour, copy investing, and trading, following the traders in the social trading network, which leads to excessive risk-taking. This study aims to utilize the advancements in behavioural finance and neural processes to explain the mechanism and impact of FOMO, trying to give a basis to safeguard individual e-traders from financial market errors and protect their personal and family wealth.