It is pretty much without doubt that the digital options contracts offered by binary options offer one of the fastest ways that new traders can get up and running with trading of the financial market. However to make money you need to know what you are doing and as with most things, experience can carry you a long way.
If you want to avoid getting scalded in the markets then it is advisable that you take the time to read up on common trading mistakes. In this way you should be able to avoid them and recognize situations that could disrupt your path to profits.
In this article I list common newbie trading mistakes and offer steps on how you can avoid them.
Trading 60 Second Contracts
OK so 60 second binary options contracts offer an attractive proposition. You buy your contract and in less than sixty seconds you book a 75%+ profit on your investment. Right? Well this is the theory. The reality of course is somewhat different.
While these contacts are headline grabbing (15 and 30 second contacts are also included here) they provide just about the fastest way in which you can blow your account balance if you don’t know what you are doing.
The speed of the transaction brings a number of factors into play before you even settle on a strategy; price feeds, broker, internet speeds. These are all factored into the success or otherwise that you will have with these contacts. Don’t think that very short term contacts mean higher gains. They don’t.
Succumbing To Emotion
Emotional trading is one thing that most individuals succumb to at some point in their career. It can prove very damaging to your account balance and therefore need to ensure that you recognize and avoid it before your account suffers.
So what is emotional trading? It is where you stray from your strategy trade on how you are feeling. A ‘gut instinct’ if you like. Of course there are stories of people who have made a fortune on a ‘hunch’, however the reality is that more people lose a fortune than make it when trading in this way.
Avoid the temptation of jumping straight back in to the market to try to win back a loss or letting greed fuel your trading decisions. If you do you are likely to find that your account balance starts to move in the wrong direction very quickly.
Trading With Small Deposits
There is nothing wrong with trading with a small deposit, provided that your broker offers small transaction sizes so that you can manage your risk. Many new traders fall into the trap of depositing too little and as a result end up trading too much of their account on each positions they take. The result? They make higher than average profits when winning and higher than average losses wen losing
It is also important that if you trade with a small deposit that you have realistic expectations. Making several thousand dollars per month is going to prove unlikely if you only deposit the minimum of say $200 with a Binary broker.
Lack of Preparation
Many traders, particularly those who are starting to trade binary options for the first time, fail simply because they haven’t prepared themselves properly. Financial trading like any other skill needs to be learnt over time. As with any profession there will those people who take to it readily and others who will need to work to get a decent set of skills which will allow them to make money.
It is vital that you before you even attempt to trade that you spend a decent amount of time researching the ‘ins an outs’ of financial trading. Take some time to research different markets and the different types of analysis that you can use. Only once you are confident that you understand what is happening and how you can profit from these markets should you consider starting trading.
Running Before You Can Walk
This common mistake of newbie binary options traders is somewhat similar to the previous one. However while you can be prepared, it is ultimately possible to push too hard. This can lead to failure. Remember if you are new trader you won’t have the experience to read the markets as well and therefore you are more likely to end up making the wrong decisions.
Keeping your trading simple is the best recipe for trading success. Don’t over complicate your trading and build your position sizes gradually. It is important that your ability progresses at the same time as your confidence. Being overly confident when you first start out can be the undoing of even the best trader.