You may have heard of many disgruntled traders complaining about how they didn’t make any or actually lost money with binary options trading. Well they probably made a lot of mistakes. At the same time, you probably know of plenty of success stories where traders have managed to make the profit that they set out to make.
So, what sets these traders apart from one another? Well, one of the reasons that traders may be failing is because they tend to encounter many of the pitfalls associated with this type of trading. To learn how to avoid these, you must first understand what are the main mistakes traders make with binary options trading? Here are the most common ones:
Lack of Money Management
Binary options can be a bit of a rollercoaster ride – sometimes you win and sometimes you lose. Unfortunately, there is no way to get around that. Still, you can ensure that you do not lose all of your money in the process.
This is by creating a strategy about how you are going to invest in this form of trading. The first thing you should never do is to invest all or even a majority of your money in one trade. It does not matter how confident you feel about the outcome.
You should always allocate a certain percentage that you invest in any given trade. Typically about five percent of your total capital is a good number. If you are not particularly assured about a trade, it could be worth it to reduce this amount even more.
Not Utilizing Trading Strategies
There are some individuals that treat binary options like gambling. They simply place money on trades that they ‘feel’ like may end in an in the money trade.
Either that, or they base their decisions off current news and make a random assumption. While these may pay off some of the time, they will more than likely end up losing you money. This is because these traders fail to use a proper strategy.
If you want to make more money than you lose, then you need to have a strategy. In turn, this strategy needs to be aligned with the type of asset, the time frame, and the tools that you are consulting. Furthermore, you need to utilize a strategy that you feel comfortable with.
Not Keeping Track
Strategies are only useful if you can conclusively prove that they are working. If not, you will need to design a new strategy for yourself. Now, you can’t really determine whether the strategy works or not if you don’t have the evidence to back it up. This is why it is important to always keep track of every trade that you make.
This includes the asset, the time period, the strategy used, the money invested, and the outcome.
If possible, it is also a good idea to make a note of the market conditions and any other important factors. Not only will this help you to fine tune your strategy, it will also give you useful cues that you can use in the future.
Now, there are many other blunders that individuals make including not having enough of capital and executing too many trades within a short period of time. Some traders also tend to get easily caught up in waves of emotions and make mistakes this way. However, the above errors are the main mistakes traders make with binary options trading. If you are new to binary options trading, then consider using one of the binary options signals providers, also known as binary options robots.