In order to become a successful binary options trader, it is not enough to have knowledge of technical analysis and have a profitable strategy . Good endurance will help you achieve truly productive trading. As practice shows, the vast majority of traders lose their deposits on the stock exchange precisely because of their inability to cope with their emotions. Sometimes, succumbing to fear or temptation, a person makes mistakes, which are quickly reflected in trading statistics. The best way to improve your performance is to understand the risks of emotional trading and develop discipline.
In this article you will find a description of the most common psychological mistakes that should be avoided.
No. 1. Gambling binary options trading
The dynamics of binary options trading quite often captivate beginners so much that their actions cease to obey any rules and the game begins in pursuit of imaginary profits. Such a trader is completely unable to adequately assess the market and make informed decisions. Driven by a thirst for easy money, he takes any unjustified risks and in the end simply loses his capital.
Newbies especially often experience losses due to emotions when trading turbo options. This is a type of options that involves trading with an expiration of 60 seconds. Since this expiration time is very fast, a profit can be made quite quickly, but beginners in binary options trading forget that a loss can be made just as quickly. Therefore, many people leave the market without even understanding why they lost money.
Another type of binary options where beginners lose money is express options. In these options, you need to specify several trading assets and their outcome, and if at least one of the forecasts turns out to be incorrect, the transaction will be unprofitable.
So what should traders do to avoid mistakes and start making money on binary options?
Here are some tips to help deal with this problem:
- Online trading is serious work. It should not be taken as a money game. For successful work, what is important is not luck, but systematic profit, which can only be ensured by sober calculation, patience and vigilance;
- The desire to recoup has ruined many traders. You should never regret the losses received and try to return the lost money with new transactions. This approach is doomed to failure. If your forecast did not come true or you made a mistake, do not lose your head - just accept the result and leave it in the past. There are no traders who make exclusively profitable trades. Learn an important truth - trading is a trade of probabilities, where your overall result is the sum of positive and negative trades. And if you receive a loss several times in a row, take a break, rest from work and only return to it with a fresh head;
- Always adhere to risk management rules. Determine the size of your bets within 1-5% and strictly adhere to it. Risk control will limit unsuccessful trades and provide the opportunity for positive trading over the long term. Strategies like Martingale do not help this at all, so they should be completely eliminated;
- Keep a trading diary . Mark all your transactions in it and then analyze it. By taking a fresh look at your trading, you will be able to spot many mistakes and correct them in the future.
No. 2. Fear
Fear of losses is also one of the common problems of novice traders . Having analyzed the market situation in detail and given it an adequate assessment, a trader, out of fear of possible failure, may refuse to open a position and miss out on a profitable deal. If this happens systematically, then such work seriously reduces the amount of profit received, and therefore leads to the overall result of trading in the negative.
Don't be afraid of possible mistakes. Even the most successful of traders commit them. You can come to an understanding of price behavior and gain useful experience only through practice, and it includes both positive and negative transactions.
It is worth noting that a demo account is not suitable for practicing emotional control. Not a single person takes fictitious money seriously, and therefore does not experience any special emotions during training trading. Only real trading will reveal all the emotional factors.
An adequate choice of trading account size also helps eliminate the basis for many psychological problems. Start trading with small capital. You don’t need to add too much, only leave the amount that you are not afraid of losing. Additionally, you can use bonuses and promotional codes for binary options . This will allow you to increase the deposit in some cases up to 100%, and this will be real money, which will not be so scary to lose, since it will be a bonus. Of course, there is no need to trade with borrowed or last-minute money at all. If the trading amount is correctly selected, it will be easier for the trader to deal with it.
Fear itself is not an unusual feeling. All normal people experience it in one way or another. But you shouldn’t give in to it, it’s important that it doesn’t stop you from making the right decisions.
If you feel nervous while trading, you can use breathing techniques. Here's an example:
- take a deep breath;
- hold your breath for 5 or 10 seconds and tense your muscles;
- exhale slowly;
- pause for 3 seconds and then begin repeating the exercise (2-3 times).
Such simple breathing exercises help saturate the brain with oxygen and reduce stress levels.
A good solution for stabilizing your psycho-emotional state can be listening to calm music (for example, classical).
No. 3. Greed
You've probably encountered a situation where a series of successful trades made you want to increase your bet, contrary to the rules of money management and risk management. This idea comes to all traders one way or another. Some justify such increases with perceived luck, some start gambling and chase a big jackpot, while others simply want more dynamic trading. In fact, all these people are making the same mistake. Driven by greed for quick and big profits, they forget that effective trading is built on strict discipline.
The rules of risk management were not invented for fun. These are rules forged by the experience of many generations of businessmen in the pursuit of reasonable profits over the long term. Don't risk everything for a slim chance. Systematize your trading, develop discipline, analyze and adjust your work by keeping a diary, and your achievements will exceed expectations.
No. 4. Lack of desire to learn trading
Every novice trader wants to get started as soon as possible. Of course, practice plays a key role in gaining experience, but do not forget that acquiring useful and important knowledge from theory is extremely necessary. Although a trader will have to develop his own understanding of the market, he should learn many general aspects of binary options trading before starting to trade on a live account. This will eliminate many mistakes and shorten the distance to developing a truly profitable strategy.
You can start learning how to trade binary options by at least reading specialized literature for traders , from which you can learn about the basics of analysis and trading in general.
Many beginners spend a lot of time searching for the Grails . Such an activity cannot be called reasonable, not only because the Grails, as such, do not exist, but also because all this time would be much more useful to spend on studying books on trading that have been proven over the years and by other people’s experience.
Don't rush into trading headlong. At the start, you just need to start learning the basics of trading step by step. Moreover, it is so exciting that you will not even notice how the amount of knowledge will grow to a seemingly previously inaccessible level.
No. 5. Lack of the right mindset in trading
A good mindset really has a significant impact on the quality of trading. The point is not at all in the materialization of thoughts. It’s just that a trader with the right mindset creates a certain direction for himself, which he begins to follow even subconsciously. Stop being disappointed after bad trades or absorbing any other negativity. Define your goals and aspirations, tune in to positive and productive work, and good results will not take long to arrive.
One of the most effective methods of psychological adjustment is visualization. It is essentially a method of self-hypnosis by imagining positive goals or the future. You can use the following exercise:
- First, think about your finances. What is your desired level of monthly and annual profit? What would be the amount of capital that would be kept in the accounts? Present it visually.
- Now imagine a house in which you would like to live. What does it contain? What does he look like? Try to bring more details into the image.
- Repeat this visualization for other important areas of your life, be it family, career or hobbies.
- Never bring negativity into the images you present. Don't think about whether it will be difficult to achieve these dreams or whether you have obstacles in front of them, just imagine what you want.
- To achieve lasting results, repeat this exercise every day. Or describe the images on a piece of paper and re-read it from time to time.
Of course, such an exercise will not bring money in itself, but it will help you tune in to productive and efficient work. Also, a stable image of your goals will make it easier to cope with negative emotions, which will affect your trading results.
Conclusion
Lewis Borsellino, a leading S&P futures trader and author of trading books, notes that “successful trading is 90% psychology and 10% technique.” And one cannot but agree with this. Even though a good strategy helps expand a trader’s capabilities, it is simply impossible to implement them without discipline.
At the end of this article I would like to share a few more techniques that help in trading:
- Always look positively at any result, even if it is negative. It is better to take failures with humor than to succumb to negativity.
- Don't get overwhelmed by trading for too long. The mind must be clear when making trading decisions. Try to take breaks.
- Maybe not everyone talks about it openly, but unsuccessful trades one way or another cause stress for the trader. Of course, you shouldn’t accumulate it, find a suitable way to remove it. For example, you can do physical exercise. They are great for reducing stress and helping you take your mind off work.
- Every person notices that sometimes he experiences a state of heightened attention when his work becomes especially effective. To activate this state, you can use a simple exercise. Focus on your breathing. For about 10 minutes, watch each inhalation and exhalation, their rhythm. When you notice that your breathing begins to outpace your thinking, completely switch to only your thoughts. After a minute, pay attention to your breathing again. This exercise helps develop attention and control over it. It will be easier to concentrate on time.
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