It is important to never underestimate the impact of even one seemingly minuscule mistake in binary options trading. Of all typical blunders that the traders keen to make, here are the 7 most common slipups to wacth out for, and how to overcome them.

Everyone wants to do the best in trying something, particularly when dealing with real money loss as the ultimate risk. The outcome though, doesn't always reflect the expectation. Instead of emerging gloriously from all of the profits you dream to make, you stumble into unintentional mistakes that can eventually kill your binary options trading career.

Suppose you're a beginner in need to know the right way to trade, the first thing you need to ingrain in your mind is that even the smallest thing matters. Indeed, it is important to never underestimate the impact of even one seemingly minuscule mistake. Doing just that will eventually shape a bad habit in which you tend to never pay attention to little details, when in fact they can grow to bigger problems.

So, what are the mistakes we're talking about here? Of all typical blunders that binary options traders keen to make, here are the 7 most common slipups to wacth out for, and how to overcome them:

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1. Failing To Trade With Proper Preparation

What will happen if you jump into real binary options trading without the necessary knowledge and experience? Bad things. And what may come to occur if you dive into real trading without realizing that you still lack the essential insight and background? Even worse things happen.

Binary options trading is easy, practical, and simple. But the notion actually applies to the way you operate it. In deciding what button to push, whether it is call or put, is an entirely different matter. The process needs thorough analysis so that your trading is not based only on speculative thoughts without proper technical and fundamental grounds.

 

What to do

First thing first, learn everything about binary options, starting from how to trade, trading strategy, reliable money management, to what kind of option types provided in most brokers and how to make use of them. Next up, practice in demo account to earn experience. Last and the most important, make sure that you advance to live account only when you are decidedly ready to face losing real money. Having a steady profit rate and controlled risk management can be the forefront signs that indicate you're set to blaze your way in making real money.

 

2. Failing To Choose Broker Appropriately

What comes from trading in an unsuitable binary options broker is seriously detrimental. From feeling cheated to having your own trading conditions unfulfilled, there is no other word to describe the situation but disastrous. Some who realize it may choose to leave, some feel there is no other way but stay as they have deposited their real money and the brokers don't want to make it easy for them to withdraw. Surely, you don't want to end up in that kind of crisis, right? Sadly, a lot of beginners can't seem to resist going down that route. Either they have no idea of the proper way to look for a binary options broker, or they do have some certain degree of knowledge, but choose to ignore it for the sake of attractive features like bonus and unbelievably tremendous returns.

 

What to do

Understand that binary options broker has specific attributes like returns, trading platforms, option types, regulations, minimum investment, and minimum deposit. To learn each aspect's ideal condition, you need to get a hold of the information on How To Choose A Binary Options Broker. What's more important but often missed is your research can't be limited to only one specific broker. Find two or more brokers and compare all of their features to know which one is the best, and most suitable for your needs and conditions.

Furthermore, never get lured by fantastic bonus offers or unrealistic returns. If anything, they should alert you that the broker offering such advantages is unreliable. Remember, binary options broker needs to make profits too. If it gives too much money just to attract more clients, either it has hidden ways (that are mostly disadvantageous to traders) to compensate its losses or it eventually goes bankrupt.

 

3. Failing To Set The Right Amount Of Deposit

Confusion when setting initial deposit is familiar among newbies. How much should I pay for the first deposit? How can it influence my binary options trading? And more questions alike are quite common to find in their curious minds. Deposit size is indeed significant, as finding the ideal amount would later determine your chance and money management. Common mistake in regard with this matter is that traders don't adjust deposit amount with their funding capabilities. Therefore, they often find themselves in a situation in which they are not prepared to face big loss.

 

What to do

As a beginner, you are advised to start with relatively small deposit. How much exactly this small deposit is, is entirely dependent on your standard. The key is, your initial deposit should be prepared as a sacrifice. In other words, don't put any deposit bigger than what you have prepared to lose.

If it is the case, then does it mean I only need to deposit as minimum as possible? Not necessarily. Actually, the proper amount for deposit is not too big but not too small either. Unless you plan to have limited chance in opening trades, then don't make your deposit too small. Supposing that your broker has $100 minimum deposit condition, it may be understandable to fund your account in that exact amount, only if the minimum investment is not more than $10. But if you trade in a broker that allows $10 or less for minimum deposit, then it is imperative to fund your account with more number than that requirement.

 

4. Failing To Pick Trading Instrument Opportunely

To have a successful trade, you have to know the right asset to trade. It's a part of trading strategy that may determine your chance of making profits in binary options trading. This applies in binary options too, since you need to analyze the asset's price movement to be properly in-the-money. But with the various instruments offered in binary options, it's not a surprise that new binary options traders often get lost in the vast options of trading instruments. For example, there is forex with the highest liquidity of all, and then stocks, indices, and commodities that are generally provided in most of binary options brokers.

 

What to do

Only trade the asset that you know of. If you understand the dynamics in forex markets, know what necessary things to pay attention to in analyzing the price movement, then it is best for you to stay with the asset class. If sometimes later you want to try out new instrument, it is important to make sure that you have studied it thoroughly, and try it in the demo account first before attempting any effort in real trading. Plus, make sure to avoid these dreadful habits:

  • Trying multiple kinds of asset at the same time: Even though you may understand every one of them, there won't be enough time to really comprehend the price movement of each asset, leading you to be unprepared in responding certain changes from different markets.
  • Choosing based on assumption: Making general assumptions of an instruments as the foundation of your decision can lead to unfavorable outcomes. Take an example from gold. For so long the commodity has been thought to have good stability. But the current fact is, the yellow metal's volatility is no longer reflecting that assumption. Considering how market condition can change overtime, establishing decision based on your own understanding is certainly the best.

 

5. Failing To Grasp The Real Idea Behind Short-term Trading

It's no longer a secret that binary options' specialty is short-term trading that can reach down to 5-minute or even 1-minute trading. If you happen to have a short-term style, there's no doubt that binary options trading is going to suit you perfectly. But the thing is, making profits from short expiry times in binary options is not as easy as it seems. For inexperienced traders, this functionality may render higher risk as short-term traders are mostly involved in high-frequency trading, making them prone to speculations and emotional instability.

 

What to do

Don't get flustered with difficulties explained above. As long as you do the following steps, earning profits from short-term trading is not impossible:

  • Make a trading system with the complete package of strategy and money management, then test it
  • Maintain your discipline in carrying out the trading system
  • Control your emotion by trying not to get revenge after multiple losses or be overconfident following some winning streaks
  • Always have this notion in mind: Binary options trading is full of risk and should be regarded carefully with an understanding that the price may not go as predicted

 

6. Failing To Keep Emotions At Bay

As mentioned above, short-trem traders may have higher risk of getting involved with too much emotion. But if you think you will be safe from emotional influence just because you prefer to have your options closed with longer expiry times, then you are quite mistaken. In truth, every trader (except for robot users) is in the risk of being disrupted by trading emotions. It may have something to do with traders' level of experience actually. Beginners find themselves exposed to emotional decisions more often than not, as most of them haven't quite learned how to handle market change in real situation.

 

What to do

As Jody Samuels said: Try finding the middle ground between fear and greed. Fear usually takes over after you suffer big or back-to-back loss. Contrastingly, greed appears following a chain of profits in which some of them generally come from luck. The skill of balancing these emotions grows with experience. But while you develop the needed finesse, you can try to learn from mistakes, think rationally, and stay discipline to trading system to fend off any emotional influence from the beginning.

 

7. Failing To Focus

Diversification is often mentioned as a solution that saves some traders from complete loss. You may try this kind of technique, but try to not have too many accounts opened in different platforms. It's not a good money management, and it will be too much to handle if you're a novice-level trader. For starter, you will have to be able to open multiple positions and monitor every single one of them. For experienced traders who know their own way, it may be a risk worth taking, but it will just be a distress for newcomers with little understanding of binary options trading.

 

What to do

You can start by opening one account in a platform and focusing to learn how to gain profit consistently in that particular account. Only when you have a good insight in how to make profit steadily, then you can consider of opening more accounts in different platform. After all, binary options has its own intricate aspects that make it not as easy as what it appears to be, so you may want to delve into one thing at a time rather than dealing with different kinds of confusion simultaneously.

 

Last Words

Traders are divided by their capabilities in overcoming failures from their own missteps. A winner makes mistakes, learns from them, and gets the better of them. A loser commits mistakes and lets themselves be defeated by them. A smart trader recognizes the mistakes beforehand and tries to avoid them from the beginning. Now, which one do you want to be? A winner? A Loser? Or a smart trader?

Being a winner is a fine choice, but why choose to go through all those debacles if you can avoid them in the first place? Here is where all of the abovementioned tips come into play. If you prefer to be the smart one, acknowledge the 7 common mistakes, and try your best to overcome them.