Almost all beginners in binary options or other product trading make the same mistakes. However, trading differs from real trading business in that decisions that are made are no longer negotiable and irreversible. Therefore, wrong decisions are always associated with a loss and mistakes are always punished. It is therefore important for the dealer to avoid mistakes as much as possible. But what errors are actually involved?
Common errors when trading binary options
- Let yourself be blinded by the return
High double-digit returns are not uncommon for derivative products. Nevertheless, traders can often be blinded. Traders with little capital are particularly affected because this target group would like to get rich quickly. Leveraged products are predestined for this. The trader should therefore always be aware that the return at the end of a trading period is important, and not that of a single trade.
- Not familiar with the products
A high double-digit return not only tempts you to want to get rich quickly, but also to skip certain stages of development when learning to trade. This also means getting to know the product properties from A to Z. The fact that products are simple in terms of their functionality does not mean that they are also structured simply.
Trading binary options is easy. Deciding the direction, buying, waiting for the option to expire. But what are options anyway? What are the differences between classic and binary options? These and more questions that a prospective dealer should ask himself. And last but not least, the trader should not only know the product, but also the traded underlying.
- Trading without a system
You can say all beginners, without exception, act without a recognizable system. You often make decisions based on gut feeling. Since developing a system takes time and experience, the beginner actually has no other choice. The only problem is that his gut feeling is completely untrained. Because he also needs experience to get the right gut feeling.
Every beginner should therefore start by looking for existing systems. It is often worthwhile to log in to a good trading forum or to follow trading blogs. You can learn a lot about successful systems in this way.
- Always discard the system
As soon as a trader finds a system that works well, he thinks he is successful and believes he has done it. Unfortunately, courses are not continuous in their course. If they were, then all traders would have been in the Caribbean for a long time and would have made provisions.
Prices run in phases and therefore systems only work in phases. It follows from this, and what every trader actually knows: Losses are part of trading and you have to be able to deal with them.
Unfortunately, even long-standing traders do not understand this and therefore move from one system to the next, as soon as the previous system starts generating losses. According to professional traders from banks' trading departments, the best traders are those who make intuitive decisions based on their experience. The system then only affects money and risk management.
This is in direct contradiction to what the trading industry wants to make you know. Namely, that without a trading system you have no chances. It has to be noted that the private trader is one of the uninformed traders and therefore a system, at least for beginners, is essential.
Tip: A system is not only important for repeatedly performing the same steps in trading but to ensure some planning. One could also list the lack of planning as an additional and extremely serious mistake in trading.
- Too emotional behavior
Beginners are blinded by high returns and want to increase their limited capital as quickly as possible. As you know, the emotional aspect is decisive for whether you can become a sustainable trader or not. Many beginners act too emotionally in the sense that they cannot deal with losses, and instead of holding back, invest again and again. They get caught in a spiral that can only have a negative end.
This emotionality is particularly pronounced in some traders. Admittedly, every stock exchange trader should have an affinity for gambling, but on the other hand it also means that a gambler on the stock market will never be sustainable. It is therefore not surprising that the best traders develop a certain emotional coldness. Because a gambler cannot think clearly. His decisions are therefore almost always wrong.
The trading mistakes presented above are just some of the many that beginners like to make. However, these mistakes often have to be made, because that is part of the development process. It usually becomes critical when the same mistakes are made again and again without learning from them.
This statement is taken lightly. Because in trading, recognizing the errors can be difficult. For example, it can happen that you yourself think the mistake was that you acted too emotionally. In fact, the mistake lies in the fact that you simply bet too high and therefore did not have your emotions under control.
With the broker IQ Option, beginners can test with little effort whether they are for the trade of binary options are suitable.