Overcoming trading psychology issues with binary options is much easier than if you are trading futures, commodities, or forex. Psychological issues is what causes most traders to fail — not the indicators, not the time frames, not the markets but the “head stuff”. An old saying among professional traders is that while other jobs will not highlight your flaws, trading brings out flaws that you never even knew existed. Plus, overcoming trading psychology issues is hard because it’s just you and the computer.
3 Tips for Overcoming Trading Psychology Issues with Binary Options
- No one likes to lose — losing destroys our self esteem and confidence yet it is part of trading. For every win, there will be a loss. Sometimes, your losses will be a constant. You will feel like everything you touch turns against you. Yet other times, everything you touch turns to gold. It will not be the wins you remember but the losses. These losses can add up fast on the futures, commodities and forex market. Your risk, even with a stop in place, can be large. Even with adequate money management, you can lose more than you anticipated. After a day of being beat up in these markets, it’s hard to sleep and even harder to face then new day. With binary options, a more logical process of thinking is practiced from the first order. For example, if you want to buy a binary or spread option, the order ticket reveals both the maximum loss and maximum risk. This makes it much easier to calculate whether the trade is worth taking (logic). For example, if you try to buy the ceiling, the order ticket would show that the risk is much greater than any potential gain forcing you to realize that it may not be the best strategy at the moment. Additionally, with binary options, the risk is paid upfront and you can never lose more than you paid on entry. This enables you to relax more and focus on charts because you identified the maximum amount you would lose upfront. By adding a strategy that uses, out of the money binary options, you will soon realize that losing a trade doesn’t define you — it’s just part of the business. Why? Because you realize that you can identify home run trades using out of the money binary options that will compensate for any losses that you incurred.
- Learning to focus and read charts — while most new traders will focus on whether the DOM is red or green, since you capped your risk on entry, you can now focus on the chart for identifying the historical chart patterns that play out over and over again. Trading takes focus and it takes time to learn how to focus more on the charts and less on the ever changing red and green dollar signs. Since you know that are safe (no stops to be jumped over), you can focus on where support and resistance is forming, what the volume is indicating or where the next level will be played out. If you are a new trader, there will be many new concepts to learn. Trading futures will cost you a lot more than simply using the binary options to learn the same concepts. With risks as long as five dollars, you get the same education that trading futures with hundreds of dollars at risk will cost you.
- Learning to follow rules. You took the time to design a trading plan but then you have to be able to follow it. Again, you could choose to use the futures, forex, or commodity markets but why pay more for the same lessons? If you cannot implement and follow your rules consistently on binary options, you will not be able to do it on any other market.
The tips for Overcoming trading psychology issues with binary options is a more cost-effective and efficient way of venturing into trading the markets. You learn to deal with losses, learn to effectively accept risk and calculate profits, learn to read charts and, just as important, you learn to follow rules. This allows you to keep moving forward in your quest to becoming a day trader.