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Home» Profit Strategies » Risk Management » Binary Options Trading Psychology

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Binary Options Trading Psychology

Written by: Sophie May

A calm and logical mindset is essential if you strive to become the best trader you can be. Trading can be psychologically demanding: your own money is on the line and the markets can react unpredictably. It is important to be aware of these stresses in order to control and minimize them. The most successful traders are practiced at disconnecting from their emotions, and in the event of a loss, they can respond rationally to the change in the markets and so can successfully rectify the situation.

Psychological advantage of binary options

Binary options do offer a certain psychological advantage. For the non-binary trader, the asset’s specific price level affects the end gains or losses. There is a much higher and undetermined element of risk. Furthermore, contracts are not restricted to set time frames. Traders may be prone to second guess their actions and to buy or sell their contract before its expiration. That said, binary options traders cannot afford to become complacent and must still exhibit psychological discipline in order to fully maximize profits.

Accepting the possibility of loses

If you are conducting a large number of trades, it is inevitable that some will finish out-of-the-money. This happens to the best of us. Banc De Binary’s Senior Brokers, supported by our world class team of financial analysts, enjoy a high success rate, but none of them are right 100% of the time. Although it is hard to accept losses, it is vital to accept the possibility of loses in advance of opening your trades, so that when they arise, you are mentally prepared and can respond effectively.

Reacting quickly to market action

When you see that a position is losing, refrain from act rashly, as this is an almost certain way to continue the losing streak. Firstly, determine if the trend is strongly against the direction you predicted. It may be that the trade will still end profitably but that the asset is temporarily moving a small amount against the direction you hoped for. Secondly, once you are confident of the asset direction, you may wish to compensate for any loses. You can hedge with the same asset or trade with a related asset. It is best to know in advance which assets tend to move in similar and inverse directions to each other.

Recognizing stress

If you are nervous or tense in response to an ongoing trade, it is best to remove yourself physically and emotionally from the situation. Take a break from the computer and have a drink. Once you have calmed down and are thinking more rationally, you will be better placed to trade effectively and compensate for loses, as described above. If you are prone to stress, it may help to ignore the updating feed on the bottom of your trading platform which shows the current state of ongoing trades.

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