Every trader who is active in the market for longer knows how hard it is to stay true to his rules and to adhere rigidly to rigid systems. Too often, hope and greed influence your own actions. Trading is in no way as easy as the financial industry sometimes wants us to know. But with diligence and discipline and, of course, a willingness to take risks, it should work after some time.
If you don't take these three things to heart, you will quickly end up as a gambler. Because trading in financial instruments is a money transaction and not a game, hobby or even pastime. It's a high-risk business, because, among other things, banks and other insiders get involved. However, the private trader is not always provided with the same information as the big players exchange with each other.
But these also compete with one another on the markets, just as the private trader competes with all other market participants. Because of this unequal distribution of information, every trader of binary options should adhere to certain rules. Here is a compilation
Understand what you are doing
The investment legend Warren Buffet has always been of the opinion that one should stay away from investments that one does not understand. Of course, this also applies to the binary options trading product. Every dealer should know exactly what he is actually doing. For this, the broker's educational offers are often available to the trader. So e.g. also at BDSwiss. The broker offers its customers an extensive education center in the form of videos.
Observe and analyze the course in parallel with another and extensive software or platform
The private trader has compared to the big players less internal information about the markets. Therefore, he often makes use of the technical analysis. Binary options traders, in particular, should also be able to do this in detail. The courses at the respective providers are often not sufficient to determine a direction. One of the few brokers that offers a platform for technical analysis is StockPair.
Develop multiple strategies and implement them in a disciplined manner
Why so many traders are unsuccessful, though Do you have so much information at your disposal? In our view, it is often due to the fact that traders switch too often between trading strategies when they throw in the towel after two wrong trades. Drawdown phases are part of every system.
But the real problem, we believe, is not the change itself, but the fact that at some point traders can no longer tell their strategies apart. Rules for longer-term trading, e.g. Analysis techniques are then simply transferred to short-term trading. It's not bad to have multiple strategies, but before you start a trade you should know which one you are actually trading.
Only invest a certain amount of your capital
Most brokers do not require large amounts of capital to start trading binary options. In many cases, trading can begin with the deposit of € 100 or in a comparable currency. This entices traders to use the entire amount, since it is not a relatively large amount of money. But one of the golden rules in trading is that you should never use more than 5% of the available capital. With a deposit of € 500, the stake would only be necessary in the amount of € 25. This is how the trader hedges against total loss. At the same time, he keeps his emotions in check, because a loss of 5% is acceptable, but a loss of 100% is not. After two losses of 100%, the trader is out of the game, that much is certain.
Focus on individual markets
The markets offer daily trading opportunities. But the number of markets from stocks to foreign exchange to commodities also leads to ill-considered trading. The dealer then has the feeling that he sees opportunities everywhere. If the trader only focuses on a few markets, e.g. Foreign exchange, he can only reduce his trading frequency to important setups or patterns and thus ensure the probability of reliable profits. In addition, over time he learns more about the dynamics, volatility and reactions of the market to certain events such as market opening or the publication of economic indicators. He makes himself a specialist for this market, so to speak.
Be disciplined in every way
Traders, whether they are binary options or other products, have to learn to be disciplined. The trader's greatest enemy is emotion. Greed and fear of loss give each other a hand. Many traders continue after a winning streak until they start to lose again. They recklessly raise the stakes above the 5% rule and lose again with one or two trades what they have worked hard with 5 trades. After that, they are so demoralized from the fear of suffering further losses that they can no longer make the right decisions. Again, the dealer is out of the game pretty quickly. In order to learn discipline, a meticulous recording of trades in the form of a diary often helps.
Stay away from extremely volatile phases
Our computer age has recently reached the financial sector. In almost all markets, trading is almost 40% influenced by algorithmic systems. However, these algorithms act less on the basis of technical or fundamental evaluation, but instead use the speed to snatch the better prices away from human traders. These algorithms are most active when economic indicators or monetary policy measures are published. However, they are only a few seconds in the market and thus cause distortions and extreme volatilities.
In itself, it is not a bad strategy to use events as a human trader. However, you should always wait a while for the market to move in the right direction.
Consider trading as a business, not a game
A player often doesn't need much more to do as bet and wait to win or lose. Trading has a lot to do with preparation and analysis, so hard work. Nobody wants to work for nothing. So why make this work niece through emotional outbursts?