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Trading Psychology

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Trading Psychology

  1. 1. TRADING PSYCHOLOGY BT100 Binary Options Training Course
  2. 2. Reasons Why Most Traders Fail • Greed • No patience • No goals • Not being realistic • Gambling mindset • Can't take a loss • Consistency • Money management
  3. 3. Greed • Many traders have a bad habbit of over trading and are completely addicted to trading. If you find yourself placing more and more trades even after you have already gained a good amount of profit, your probably greedy. As a trader, you should be satisfied with making small and steady gains, rather than fast inconsistent gains, which will eventually fail in the long run. Remember, the more time you spend in the market, the more risk your exposed to. The goal is to enter the market, make some profit, and exit the market for the remainder of the day. If you spend more than 2 hours trading binary options, you are definitely GREEDY!
  4. 4. No Patience • Having patience is essential in trading binary options, in fact patience might actually be the most important factor. You should keep in mind that trading takes time and the market does not move on your time. As a trader, you should be prepared to wait long periods of time for a trading opportunity depending on your trading strategy. Many traders fail when they begin to create setups that aren't there, thus they are forcing the market.
  5. 5. No Goals • Having no goals in trading is like having no destination when your traveling in a car. Many traders fail to realize this simple concept of trading. If you don't set goals for yourself, you'll have no direction when trading and you will not know when it is appropriate to stop. When setting goals you should be completely honest with yourself and know your experience level. If you have a small account, ie $200, you shouldn't expect to make $100/per day, but instead, you should expect to make anywhere betweeen $25-$50/per day (in traditional forex and stock trading, that is considered a pretty good daily profit or Return On Investment).
  6. 6. Not Being Realistic • It's important when trading binary options that you be completely realistic when setting your goals. Many Traders expect to become rich over night and see binary options as a "get rich quick scheme;" these are the traders that don't last very long and end up destroying their account. You shouldn't look at other traders trading accounts in comparison to yours. Every trader has different results even if they're using the same strategy. As a binary options trader, you should trade with your mind, not your ego, meaning you should always trade at your own paste.
  7. 7. Gambling Mindset • Many forex traders believe that binary options is nothing more than gambling and should not be taken seriously. The problem with this is, traditional forex trading is completely different than binary options trading. In binary options we are trading against time as well as predicting market direction, and this brings the gambling aspect to it. The difference between gambling and trading is that in gamblinng you aren't using any analysis and are relying solely on probability, ie coin tossing. In binary options, we use high probability analysis in predicting the market direction, therefore, we are not relying so much on probability. Some new traders are allured to binary options because of the high payouts in a short amount of time that it offers. This can be a double- edged knife, as it increases the risk of you losing money.
  8. 8. Can't Take A Loss • In binary options trading, you should understand that you cannot win all of the time. In fact, over 95% of traders actually lose the majority of thier trades. Also, over 60% of new traders don't make it past thier first 3 months. Many traders expect for binary options to be easy but in actuality, it is the hardest form of currency trading. Being able to take a loss will seperate amatuer traders from professional traders because amatuer traders usually give up after a lossing streake. As a skilled trader, you should expect to have lossing days, even lossing weeks in trading. But this should not discourage you or make you quit. It is important to always keep an open mind and remain positive.
  9. 9. Consistency • It is important to be consistent in binary options trading. You should know as a skilled trader that not one sinlge strategy works 100% of the time. Often, new traders search for strategies that are 100% successful and they always fail. Traders try different strategies hopingthey've found the "holy grail," and the minute thier strategy begins to fail, they stop using it and continue the cylce. As a professional trader you should have a multitude of strategies that produce a decent success rate meaning 65%-70% accuracy. Just because you have a lossing streak using a particular strategy, doesn't necessarily mean that strategy doesn't work. You should learn to adapt to that strategy, or alter it to make it work for you. You should remain consistent and continue to use the same strategies until you perfect them.
  10. 10. Money Management • Having money management is one of the most important factors in being successful in binary options. Most brokers offer a payout of anywhere between 70% & 85% on standard binary options; knowing this, you will have to keep a success rate of at least 65% to be profitable. This is where money management comes into play. If you're risking too much on a single trade, you will have to win a lot more on your trades because one single loss could wipe out a series of winning trades. Let's say your starting balance is $200 and you take four trades for $5 with the payout of 70% per trade. At 70% that is a a $3.50 profit, multiply that by 4, that a $14 net profit. Now you place a trade for $100 and the trade loses. This will not only erase your winning trades, but it places you under the amount that you started with. In trading, you should only risk at the most 5% of your total balance.

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