Every day thousands of people embark onto binary options trading with high hopes of making big money, quitting their full times jobs or just supplementing their income. Others open trading account simply out of curiosity or without even giving it too much thought. Not many though realize that psychology is involved in the process right from the start and it plays a huge role in outcome of their trading activity. So if you are serious about binary trading or already happen to have a trading account we believe it would be a good idea to really understand how psychology affects everything, starting from the trading strategies you use to the amounts you invest in every trade and how you handle your winning or losing trades.
Controlling emotions and sticking to the plan
A common mistake among traders involves the idea that is a strategy doesn’t immediately work and a trader loses his money, that strategy needs to be replaced. Let’s stop for a second and try to think about it. If a strategy works for other traders, what possibly could have gone wrong that caused you to fail. Could that be a technical error on your part, or unsuitable market conditions you should have avoided, or any other circumstances that give you a doubt? It’s human nature to learn from our past experiences. If you can identify what possible mistakes on your part led to the unwanted outcome you can learn from your experience and improve your results. Quite often traders turn to be pessimistic or disappointed about the whole process if the trading system doesn’t work, and do not make any attempts to correct the situation. On the other hand being too optimistic may lead a trader to a rather risky path. Almost winning can sometimes be pretty exciting. Some people mistakenly believe that when they “almost” make a right prognosis, they are doing a right thing and an actual profit is coming soon. This approach can be very misleading as such near winning sensation can make it really difficult to stop and re-evaluate your trading methods. Solid money management strategy and clear trading plan should help a trader control his emotions and eventually develop a trading strategy that works.
Binary options trading psychology and stress factors
Among main stress factors which affect trading performance many traders name fear of loss and as turns out what scares traders the most is not the actual fear of losing their money, but the idea of betraying their dreams of having a new exciting trading career, the idea of making “a lot or money”, having a better future, etc. So it is understandable that in the event of loss the level of stress can be quite intense. It is great if a trader perceives his activity as a way to his personal success and wealth, but detachment from reality and panic can prevent any person from staying focused. A famous quote of Confucius would be the best advice to the traders, who tend to overreact in stressful situations. “When it is obvious that the goals cannot be reached, don’t adjust the goals, adjust the action steps”.
Binary options demo accounts and trading psychology
Many traders on their own experience have learned a psychological phenomenon of successful demo account trading and unexpected depletion of their account balance which occurred as soon as they switched to live accounts funded with real money. Emotions thrown into picture, such as greed, fear, overconfidence or lack of confidence, excitement, etc. can be blamed for such turn of events. During demo account trading all these psychological factors seemed non-existent as a trader was concentrated on the practicing and understanding the rules and techniques, he had no fear of losing his virtual money. Binary options demo account are great instruments allowing novice traders to learn the ropes and master their trading skills but a trader should pay attention to his psychological state during the transition to a live account trading.
Another pitfall of binary demo accounts trading is related to the fact that some traders believe that after a few days of demo trading they know everything they need to know and start investing unreasonably high amounts in their real trades. Most binary brokers limit their demo account assess periods to one or two days and that time might be enough to give a trader false feeling of self-confidence, but certainly it is not enough to master his trading strategies. Generally speaking, binary options trading psychology and binary options demo account is a rather controversial subject. Many brokers stopped offering demo accounts to their traders or replaced them with other tools, such as trading simulators or leverage.