The fairly simple use of binary options, as well as the relatively high profitability in a short time, attracts both professionals and, of course, beginners who do not want to delve into complex theories of trading stocks or currencies directly. However, free cheese is only in a mousetrap, because high incomes are followed by a lot of expenses.
Any financial trading needs to be learned, one way or another working out your strategy. In this article we will look at the main misconceptions and mistakes of novice traders trading binary options… It is possible that if you take a closer look at our advice, they will help you avoid some bad deals.
1. Trading binary options does not require knowledge
We have already touched on the consideration of this misconception at the beginning of the article, but it will not be superfluous to repeat it. Many newcomers to trading, faced with the work of binary options, find that special knowledge in working with them is not required – they figured out where the price will go, click on the button and wait.
I would like to note that even the simplest initial knowledge about the formation of prices of the asset for which the option is presented, will significantly reduce your losses… Not to mention the fact that, ideally, to trade binars for currency pairs, it is worth having a well-developed strategy and experience in Forex trading. Either way, any forecasting skill should increase the profitability of your investment by cutting down on losses.
2. Binary options are almost like a casino
Many players come to binary options trading like in a casino, focusing on the fact that the instrument is actually a “bet” deal. We will not say that this is completely wrong – there is still some similarity, however, a little practice and knowledge in the field of analysis of exchange instruments, and bets on luck turn into thoughtful strategy, increasing the probability of winning from 50/50 to a more attractive number.
If you came to binary options trading for adrenaline and fun, then understanding the process will not diminish your pleasant emotions, but will only increase, because you will start to open deals wisely. Do you agree? Then read the first paragraph of the article again.
3. Short-term binary options are more profitable
Yes, of course, buying a 60 seconds option contract and earning 75% profit in just a minute is very tempting. However, it is important to understand that making money on such short (minute, hour) intervals is not so easy, because market noise is capable of in one second turn an absolutely profitable contract into a minus…
Long-term trends are much more predictable, and therefore it is better to start with them, not chase quick and risky profits and learn to see the market.
4. Fast transition to high rates
Quick and easy profits often give rise to euphoria for newcomers to binary options trading. Having made 2-3-5-10 profitable trades on small amounts, the trader begins to think: “Why am I trifling if you can buy a contract at a higher price and get more money?” Remember, 11 trades can become unprofitable.
Of course, we are not saying that this must necessarily happen, but you need to increase the value of the contract gradually, using about 2-5% of your total deposit. Only in this case, the profit will settle in your pockets steadily.
5. Trade only one type of binary options
As we found out in the last lecture, there are quite a lot of binary options, each of them can be applied in different market situations, so you should not dwell on one thing when you can use all the opportunities of the market and binary options… It is not necessary to actively get involved in different options, but we recommend trying different options and choosing the most acceptable for yourself.
Surely, many of you have found 1-2 (and maybe more) mistakes that are typical for yourself. It is important to recognize them and move on, develop as a trader and strive for high results, and then a lot will start to turn out much better.
What else do you need to know about binary options?