Check theories before putting them into practice. Too often, after learning about a new strategy or inventing a new theory, traders begin to trade immediately without pretesting. Eventually, this leads to losses and sometimes to serious losses. Can you imagine a doctor who tests new theories on the patient? Scientists test theories in laboratories for many years before they start using them successfully in the treatment.
To test your theory or trading idea, it is best to simulate transactions under the current market conditions for some time. Many traders use historical data to test their theories, but the problem is that the market is constantly changing. The market as it has been during the past 4 years is very different from the market of the late 1990s. For this reason, testing of the theory using data from the late 1990s and using today’s data gives different results.
A small reminder: you need a minimum of 100 transactions to test a theory. Many traders test theories on a smaller number of transactions, start trading based on these theories and get disappointing results. However, this applies only to demo accounts. And that is why.
Do not make too many transactions
Many minor traders make too many transactions. They react to the movement of the market instead of anticipating it. Brokers, clearing organizations, news agencies, trading schools, stock exchanges—they all profit from operations of retail traders. The more transactions you make, the more your broker, clearinghouse, or news agency earns. They all want you to make transactions as often as possible and they do not care if you earn something or not. Trading obsession is based on the false belief that a larger number of transactions will be of greater profit. This misconception is supported by those who earn on your transactions. In the financial market, “less” means “more.” How do you think in which case will you earn more: if you close 9 out of 10 transactions in the black and one in the red or if 45 of 100 transactions are profitable and 55 are unprofitable? Remember, quality is more important than quantity. Each transaction costs money.
If you trade based on few strong trends with low risk and high potential returns, your results will be much better than the results of those traders who make hundreds of transactions each month. This is an acknowledged statistical fact, which is sometimes a secret for many traders.
Be Confident and Take Responsibility for your Transactions
When binary options traders lack self-confidence, they try to find someone who would take decisions on their behalf. They subscribe to dozens of mailing lists with recommendations, watch the news about quotes and listen to the opinions of numerous “gurus,” learning how to catch the best moment to buy an option. That is how unconfident traders work, and their trading results are terrible.
You need to take responsibility for your actions to be successful. You must learn to rely on yourself and your ability to make the right decisions. If you are a novice trader with little experience in the market, choose a mentor who will help you develop all necessary trading skills and self-confidence. Find someone who will assist you in creating your own unique trading style and teach you to rely on yourself.
If you are already experienced, but have a bad habit to get angry after failed transactions and blame the broker, your trading friends or your spouse for the market failures, then you need to learn how to take responsibility for your actions. If you are not confident in your trading decisions and in your ability to select good stocks, you should not trade using a real account. Most likely, you have not practiced on your demo account for long enough or simulated few transactions at the early stages of training.
To fix this, go back to trading on a demo account. It may take from several weeks to several years for you to be completely sure that you regularly take the right decisions with respect to transactions. Until this, you will not be able to trade stocks or options successfully. If you do not succeed on a demo account, you will not be able to make money in the real market.
Professional traders make their own choices and decisions. They select one or two sites with fundamental analysis of stocks, they have only one charting software, and they work with one or two online brokers. They are calm and confident when they open positions; they remain calm and confident when they take decisions, even when the market moves against them. A failed transaction does not affect their confidence. They know that the market movement is not 100% predetermined, and to achieve success, you have to be prepared for the unexpected. They rely on their technical skills when they select assets for trading and ignore the opinions of the people who buy assets according to the list of recommendations.
Generally, professional traders have a low regard for retail traders. The reason is simple. Most retail traders are not disciplined and do not know how to control their emotions. They ignore trading rules and rush to trade for the purpose of getting rich, believing that it is very simple if you have a perfect strategy. However, those binary options traders who do succeed are well respected in the trading community. If you really want to succeed too, follow these simple rules:
- Practice, experience and ability to trade will give you confidence. There is no such thing as over-practice.
- Behave professionally and do trading as you do business.
- Develop your unique trading style and do not follow the crowd.
- Learn to rely on yourself and be confident in your actions before moving on to real trading.
- Know your level of financial self-esteem and risk tolerance and strive to develop these aspects constantly. Remember that trading is a time-consuming process, and you should always learn something new. Trading must be your passion, but do not let this passion affect your trading decisions.
If you perform all these things, you will learn how to trade while controlling your emotions and will regularly make successful transactions with binary options.Start trading now
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.
GENERAL RISK WARNING
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
77% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.