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Anticipated regret

The imagined future pain of missing out or being wrong, felt in advance and strong enough to override a plan.

Before the trade, you run the film: the move happening without you, the chat room celebrating, the screenshot you will have to see. That imagined feeling is what drives most fomo entries, not any analysis.

The film is unbalanced. It is easy to picture the move you missed and hard to picture the equally likely version where you entered late and got stopped. Anticipated regret shows you only one branch.

Playing the other branch out loud helps. So does a rule that says any entry more than a defined distance beyond the trigger is skipped by default, which converts a live emotional decision into a settled one.

Related: regret-aversion, fomo

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

The mood around a market cycleA price path rising to a peak and falling to a trough, labelled with the feelings usually attached to each stage of the round trip.PRICETIMEOPTIMISMEXCITEMENTEUPHORIAANXIETYDENIALPANICCAPITULATIONDESPONDENCYHOPEOPTIMISM RETURNSMAXIMUM FINANCIAL RISKMAXIMUM FINANCIAL OPPORTUNITY
The mood around a market cycle. The same price path labelled with the feelings that tend to travel with it, from optimism up to euphoria and down through panic to despondency. Confidence is highest where the most money is already committed and prices are highest.

Educational only, not advice. Spotted an error? Post in Site Feedback.