Friday, January 17th, 2014 by Michael Freeman
The way we “Think”, in the context of binary options, our “Trading Psychology” is very important aspect of trading to ‘wrap our minds around’ and in the process of reflecting on our trading mistakes and misconceptions, we can change our current mindset and improve our trading skills. Before we start trading we need to first understand that the combination of day trading and high-risk investment, requires each trader to ask the following questions. Do I trade based on Impulse? How well do I diversify and manage my investment? Am I relying on a strategy or am I just gambling and hoping for a miracle? Am I actively learning from my mistakes and developing my binary options strategy? Am I trading in a comfortable environment? Let’s improve our ‘Binary Options Trading Psychology’ by addressing each of these questions individually.
Trading Based on Impulse
Never allow yourself to get into a trading frenzy! It’s a one way, downward spiral in which you attempt to make quick profits or recover your loss by doubling your trade amount, or by entering multiple trades without a proper analysis or a trading strategy in mind. Emotional or Impulse trading can lead you to pointless mistakes.
Managing Your Investment
Each trader should trade based on their budget. If your budget is limited to $500 and less, you should never trade more than $25 on a single trade, if you plan to diversify your investment and give yourself the right amount of practice and safety in case you end up losing a few consecutive trades. If you plan to invest thousands on your initial deposit, you can still settle with $50-$100 trades as it’s more than enough in order to generate a decent income. Most traders tend to invest around $250-$500 and if you are one of the them, you should probably stick to the $25 trades and work your way slowly instead of adding unnecessary risk with bigger trades.
Gambling VS Strategy
If you are a gambler, it’s a free world and there’s nothing wrong with doing gambling as a hobby, but you are probably at the wrong place and you should look into ‘Online Casinos’ instead. Following a Binary Options Strategy is fundamental and since gambling can be an addiction, you have to really ask yourself if you are truly interested to trade seriously or you are just looking for a new gambling gig! Avoid using gambling or probability strategies with binary options such as the Martingale Strategy, which originated in gambling. There are lot’s of great day trading strategies, indicators and profitable signals services that you can follow instead! Don’t wait for a miracle and don’t assume that if you ‘lucked out’ on a few trades the luck will continue because luck tends to run out while skills tend to improve!
Binary Options Mistakes
The bottom line is “You can’t change what you don’t acknowledge” and if you are unable to pin point your mistakes and admit them, how will you ever improve? After we lose a trade we tend to get angry at the markets, at the broker, at the world because it’s much harder to blame ourselves. If your current strategy failed you, admit it and move on. If you are now realizing that you’ve been trading recklessly like a gambler, admit it and move on. If you are willing to open your eyes and learn some of the mistakes that others have made before you and after you I strongly recommend watching my video on 15 Tips for Binary Options! It’s never too late to change your game plan and abandon the sinking ship.
Online Trading ‘Real World’ Environment
Unfortunately for many of us, life is not full of ‘butterflies and roses’ and when we are surrounded by negativity and discomfort, it’s hard to put our mind into online trading seriously. Being surrounded by noise, fighting or attempting to quickly enter trades in your cubicle while your supervisor’s eyes are turned away is going to be very challenging. Many ‘would be’ traders with talent and a real desire to success, might find their environment incompatible with online trading and damaging to their trading psychology. If your current environment is incompatible with binary options and there are ways in which you can change it, you should do everything you can in order to ensure that you are able to trade with a clear mindset.