There is more to binary options trading than applying the best techniques and strategies. A major reason why many traders do not excel as well as they should is not that they do not have a mastery of the skills; they just do not understand the mindset that is required to be successful at trading the financial markets.
4 Essential of Binary Options Trading Psychology
Trading psychology is the mental mastery of yourself as a trader. It is about understanding your emotions and how they impact your decisions; it is about patience and having the insight of when to enter or exit the market, when to make a trade move and when to wait it out.
So here are the basics of trading psychology for all types traders, whether you are a novice, advanced or an intermediate trader:
Patience is key to your success: Binary options trading is quite different from forex trading in that options trading relies on chart patterns for you to be able to make any trade moves. As you might already know, to make a move you need to wait for the right set up and sometimes it could take hours before you spot the right set-up. It is easy to simply give in and make a move that could cost you just because you were not patient enough to watch the charts and keep up with the patterns to establish suitable points at which to enter or exit the markets. Admittedly, trading the financial markets can be exhilarating but controlling your emotions is also part of the game.
Moderate your pace of trading: A lot of new traders fall into the trap of overtrading in an effort to leverage multiple trading opportunities to increase their chances of making more profits. Although binary options are one of the easiest ways to profit from the financial markets, you certainly will not become rich overnight even if you executed multiple trades in a day especially as a novice trader who is starting out with limited capital. The rule of thumb is to execute well-thought out, high quality trades to increase your wins and minimize your losses. Of course, the other side of the coin is overthinking your trades or being too patient to take advantage of good set-ups. It is recommendable to plan your price levels prior to executing a trade; this way, you will be able to make a move when the set-up is favorable.
Keep emotions a bay: Let’s face it—spending money can be emotional. No one wants to lose their hard earned money. Making your trade decisions based on fleeting emotions is a major mistake that could cause you significant losses. How do you separate emotions from your trades? It is best if you invest just 1% of your extra income on any trade you choose to engage in. This might look like such a negligible amount to invest but the smaller the amount you put on the line, the lesser emotionally entangled you will be with any trade that you execute.
Focus less on the money: This point relates to the one above. Knowingly or unknowingly, many traders have a specific payout target that they want to attain at the end of the day, week or month. Of course, every trader wants to make profits but if you make money your main focus, you will certainly become very emotional over your trades. In turn, you will lose focus on making high quality traders, thereby increasing your losses. A better approach is setting a realistic goal, for example, by targeting to have 65% of your trades ending in the money.