FOMO Bubbles

The FOMO Bubbles component in the ILPAC indicator is designed to help traders identify moments of heightened market enthusiasm, commonly referred to as “FOMO” (Fear of Missing Out). By pinpointing areas where buying or selling intensity surges, this component assists traders in recognizing potential reversals or continuation zones, providing a unique perspective on market sentiment shifts.

Key Features of the FOMO Bubbles Component

• Multi-Version FOMO Detection: The component offers two FOMO bubble detection methods — FOMO V1 and FOMO V2. Each version has distinct detection criteria, allowing traders to select the one that best matches their trading style or market context. FOMO V1 is optimized for capturing rapid, intense FOMO events, while FOMO V2 uses different thresholds to highlight sustained market enthusiasm. (FOMO V2 is the latest version but V1 was left inside in case users were using it.)

• Variable Bubble Sizes: FOMO Bubbles are displayed in different sizes based on the level of FOMO detected. Small, medium, and large bubbles indicate varying degrees of buying or selling momentum, helping traders gauge the intensity of the market sentiment in real-time.

• Adjustable Noise Filter Factor: A noise filter setting, particularly useful with FOMO V1, allows traders to control the sensitivity of FOMO detection. A higher filter factor reduces the likelihood of detecting smaller, less impactful bubbles, focusing instead on major FOMO events that may lead to stronger moves.

How to Use the FOMO Bubbles Component Effectively

• Select Detection Version Based on Market Conditions: In highly volatile markets, FOMO V1 can help capture short-term sentiment shifts for rapid trades. For more stable or trending markets, FOMO V2 may be more appropriate, as it considers sustained buying or selling pressure.

• Use Bubble Sizes to Gauge Sentiment Intensity: Larger bubbles indicate stronger FOMO activity, which may signal potential reversal points. Smaller bubbles may indicate a brief sentiment spike, which could resolve with minimal price change. Watching for clusters of bubbles can provide insights into potential continuation or reversal zones.

• Combine with Liquidity Heatmap for Confirmation: When FOMO bubbles appear in liquidity-rich zones (identified by the Liquidity Heatmap), this confluence can confirm a high probability area for potential reversals or trend continuation, adding confidence to trade entries or exits.

Best Practices

• Adjust Noise Filter for Different Time Frames: In faster time frames (e.g., intraday trading), set a higher noise filter to reduce the number of bubbles and avoid minor sentiment spikes. For longer time frames, a lower noise filter may help capture larger sentiment shifts.

• Use for Caution in Extended Trends: If large FOMO bubbles appear near extreme highs or lows, this can signal potential exhaustion in the trend. In such cases, consider tightening stop-loss levels or planning exits, as these areas often precede corrections.

Example Use Case

• Setup: Select FOMO V2 for a trending market and set the noise filter at a moderate level.

• Execution: If a large bearish FOMO bubble appears after an extended rally, it may indicate the market is reaching an exhaustion point, suggesting a potential reversal. Conversely, a large bullish bubble in a downtrend may signal that buyers are stepping in, providing a potential buying opportunity.

The FOMO Bubbles component offers a unique way to visualize surges in market enthusiasm, helping traders identify potential reversal zones or areas of strong sentiment. By monitoring bubble size, location, and alignment with other ILPAC components, traders can gain valuable insights into market sentiment shifts and fine-tune their entries and exits accordingly.