Hooray! It’s 2016! Time for a fresh approach to trading the markets.
For both new and old traders, we take a look at the top mistakes that you need to avoid to be a successful binary options trader in 2016.
1. Get Yourself a Good Broker
You’ve probably heard this mentioned a thousand times but It really needs repeating… GET YOURSELF A DECENT BROKER!
Yes you want a broker that offers you a good return on your traders and yes it is nice to have all the bells and whistles that many provide. However don’t let these these things (or the bonus) cloud your judgement when opening your account.
What is most important is that you open an account with a broker that is reliable, won’t scam out of your money and importantly won’t go bust.
While brokers offering binary options are increasingly having to measure up due to tighter regulation and scrutiny, don’t sell yourself and your trading short by going with a bucket shop.
Stick to a big name, regulated and reputable broker and you will help your trading and keep your deposited funds safe guarded from any black swan.
2. Deposit A Sensible Amount
One thing that you need to think about is the amount you set aside to trade with.
A good money management strategy and balancing your risk is as vital for binary options as with any other form of trading or investment.
You should NEVER trade with more than you can afford to lose.
However if you want to trade successfully then you will need to set aside a reasonable amount of capital so that you can trade with a balanced strategy. Too many traders start with too little and end up in hot water as a consequence.
While I would not advocate trading with a large amount of money on a platform that you are not familiar with, you should not sell yourself short. Trading with too little can be just as damaging.
Imagine. You open an account with $200 and trade $25 per contract. That works out at 12.5% risked on each contract you place in your binary options account! Good trading practice says you should not risk more than 5% on a position. So from the outset you are setting your trading career up to fail!
If you can’t afford a good deposit to start trading with then my advice is to start saving. Use this period of time to learn about the markets and develop your strategy.
Trading with too little can be as detrimental to your performance as trading with too much!
3. Get to Grips with Bonus Terms and Conditions
There is nothing to get a traders blood boiling like the mention of a broker bonus.
The free deposit bonus offered by brokers look exactly what you need when you start trading. It looks to offer you free money and a chance to make more cash from your trading.
The problem is that this is only a half truth.
It maybe the time of year for seasonal good will but the truth is that a broker is not going to just gift you money. There will be conditions attached to the bonus that is added to your account and it pays to know what these are before you willingly accept.
Most deposit bonus ‘gifts’ are tied to a requirement for you to trade a specified volume in your account. This is also known as ‘round tripping’ and may require you to trade a volume in excess of 20 or 30 times your deposit amount.
A bonus can be used constructively. It pays however to know what you signing up to before you accept. Remember a bigger bonus is not necessarily a good thing. It may simply tie you to the account for longer.
Also check out the brokers withdrawal process. This is a common complaint among traders who expect instant access to their money.
4. Learn To Trade!
Learn to trade binary options? Surely he can’t be trying to teach us to suck eggs!
Well actually yes. How can you ever expect to make money if you aren’t able to trade!
Far too many people who dabble in binary options do so without the expecting that they will ever need to learn how to trade properly. They treat this form of trading as a simple wager and then condemn it when it doesn’t work out
If you want to establish yourself as a successful trader then you are going to need to learn how to trade the markets and identify profitable opportunities by YOURSELF.
There is an element of hard work in this. However don’t expect to make money over the long term if you make this mistake that may binary options traders fail to avoid.
5. Work Out Your Strategy Before You Trade
Once your account is opened there is going to be a huge temptation to trade.
With money in your account it is only right that you will want to set off on the path to glory. However jumping the gun like this can quickly land your account in hot water.
It also sets a destructive pattern for your trading.
Binary Options may offer you a 50/50 chance of winning on each outcome. However generating a profitable and sustainable win rate is not as easy as it sounds. Take a look at the post on binary options win rates that I wrote if you don’t think this is the case.
Recouping your losses from ‘silly’ emotional trades (the kind you might be tempted to do when you first start out) really can damage your account beyond repair. You want to avoid this type of trading from the outset so be sure you have well thought out strategy before jumping in.