Trending Stocks: Wait for the Setup or Get Slaughtered
July 16, 2025
Picture a viral meme exploding across social media, igniting a frenzy of likes, shares, and overnight fame. Now, compare that to a stock surging on the trending list, drawing massive crowds of investors eager not to miss out. At first glance, these worlds seem unrelated—a digital joke versus a financial instrument. But here’s the counterintuitive insight: the psychological machinery driving a TikTok trend is astonishingly similar to what propels trending stocks to dizzying heights. Both are powered by the same combustible mix: groupthink, FOMO, and the irresistible high of “being early.” Understand this, and you unlock the rhythm beneath the noise—a rhythm that tells you when to pounce and when to stay the hell away.
The Psychological Connection
The Magnetism of the Crowd: Social Proof and Herding
When a song goes viral or a stock dominates headlines, it’s rarely about intrinsic value. It’s about optics. Social proof—our baked-in tendency to follow the herd—fuels both. In markets, it’s herding: a dopamine-charged rush of capital chasing momentum, not merit—the same mechanics are behind a trending dance challenge or meme. Everyone joins not because they’ve thought it through, but because they don’t want to be left out.
David Hume nailed it centuries ago: we are creatures of habit and imitation. Reason often takes a backseat to sentiment, especially in large crowds. This is why investors stampede into hot tickers, just as internet mobs pile onto hashtags. The GameStop episode? Not a financial thesis. It was a digital flash mob, turbocharged by tribal adrenaline.
FOMO: The Invisible Hand That Pushes Late Buyers Over the Cliff
The real engine behind both viral content and trending stocks? FOMO. It’s not logic. It’s the gut-punch feeling that you’re missing something big. In culture, it’s that itch to download the hot app or wear the new hype drop. In markets, it’s the scramble to buy a stock not because it’s a great setup, but because “everyone’s in.”
The Harvard Business Review nailed it: FOMO bypasses cognition. It hijacks the nervous system, making you act before you think. It’s why Dogecoin surged—millions bought not on fundamentals but because others were already in, and no one wanted to be the idiot watching from the sidelines.
The old trader’s wisdom holds here. Jesse Livermore warned of it a century ago: “It is not the thinking that makes the money, it’s the waiting.” FOMO is the opposite of waiting. It’s the emotional fire that burns portfolios.
The Allure of Novelty: Recency Bias and False Patterns
Humans are wired for novelty—it’s a survival instinct. But in markets, it becomes a liability. Trending stocks feed off recency bias—our tendency to overweight recent price action and expect more of it. A 40% rally triggers something primal. We think: it just moved, it must keep moving.
This is where pattern recognition mutates into illusion. Investors start seeing signals in noise. They mistake random moves for trend continuation. A trader thinks he’s reading momentum; he’s just reading the echo chamber.
Laozi, the ancient Taoist sage, might’ve whispered a warning here: “To know yet to think one does not know is best.” That humility—knowing when you’re guessing—is what separates survivors from victims in fast-moving markets.
Influencer Effect: Authority and Identity
Influencers catalyse both trending stocks and viral trends—whether it’s a celebrity touting a stock or a social media star launching a new dance. Research shows that perceived authority can override scepticism, persuading people to act against their best interests. Investors often follow high-profile “influencers,” while trendsetters mimic the online elite, both seeking belonging and validation.
Practical Applications
Spotting and Managing Your Biases
Awareness is the first step. Next time a trending stock or viral trend tempts you, pause and ask: What is driving my interest? Is it genuine analysis, or the magnetic pull of the crowd?
Borrowing Trendspotter Wisdom for Investing
- Set guardrails: Define your investing strategy in advance to resist impulsive moves based on hype.
- Question the narrative: Scrutinise the fundamentals behind trending stocks, just as you would verify a viral claim before sharing.
- Embrace selective contrarianism: Sometimes the best move is to sit out the frenzy and look for opportunities in the overlooked.
- Use FOMO as a signal: Instead of following it, let heightened FOMO prompt you to double-check your reasoning and risk.
Case Study: From Meme to Market
Consider Raj, a tech-savvy investor who once lost money by chasing a trending stock he saw hyped on Twitter. After reflecting, he realised the same impulse drove him to share viral videos without vetting them. By applying a “pause and verify” rule from social media to his investing, he learned to resist the crowd’s emotional pull, focusing instead on long-term value.
Key Takeaways
- Social proof, FOMO, and recency bias drive both viral trends and trending stocks.
- Recognising these patterns in yourself is the first step to resisting them.
- Disciplined frameworks borrowed from trendspotting can make you a smarter investor.
- Question authority, both online and in markets, before acting.
Reflection Questions
- When was the last time you chased a trend—financial or cultural—without pause?
- What emotions or social cues influenced that decision?
- How could a deliberate pause have changed your outcome?
Conclusion
Market swings and viral trends are two sides of the same psychological coin. By understanding the forces behind trending stocks, you don’t just become a savvier investor—you become a sharper observer of human nature. The next time a stock or meme goes viral, recognise the ancient instincts at play. Harness them consciously, and you’ll gain not only an investing edge but a new lens through which to read the world’s ever-shifting currents. That’s the kind of insight that sticks—and pays dividends, far beyond finance.
You don’t win this game by reacting to heat. You win by studying the temperature before the fire starts. Most retail players rush in at peak exposure, just when institutions are rotating out. Why? Because they followed the crowd instead of the setup.
The best traders wait. They let the madness play out. They observe. They watch price action after the hype has died down. They allow the froth to rise, and then they fade it. Or they wait for the pullback and strike when the tape confirms a second wave. No prediction. Just preparation.
As Livermore said, “The big money is not in the buying or selling, but in the waiting.”
Let the crowd chase. You wait for the setup. Otherwise, the trend you’re chasing might just be the cliff you’re running off.