What is FOMO in trading, and how does it affect decisions?

FOMO (Fear of Missing Out) is the urge to jump into a trade because a stock is rallying and others seem to be profiting, often without a proper setup or plan.

FOMO-driven trades tend to happen late in a move, right when the risk of a reversal is highest, since the “easy” part of the trend has often already passed. Sticking to pre-defined entry criteria is the main defense against it.