In binary options trading, the payoff for the trader is either nothing at all or a fixed amount of money. We also refer to this type of trading as all-or-nothing options. According to Olymp Trade, which has a well-known trading platform, there are two types of traders:
- Those who make profits.
- Those who are always on a losing streak.
What separates the two classes?
Read on as I share some of the secrets on how to succeed with binary options trading.
Knowledge is Power
For all journeys, you need a road map, and the road map for successful binary options trading is knowledge.
Before you get deep into the waters, you need to have an intimate knowledge of binary options. Learn how binary options work, and understand their mechanisms. Add to this some thorough trading market research and you will be well on your way to becoming a successful binary options trader.
So, before anything else, you should learn how to interpret charts, understand how to use binary tools, and be familiar with different trading strategies.
Utilize Demo Accounts
In the world of trading, demo accounts are underrated. Unfortunately, too many people are unaware of how important and useful they are. In many cases, users see demo accounts as a way of testing a broker before committing.
In reality, a demo account should be considered as a dress rehearsal before the real thing. It’s here that you can keep on trying different strategies and seeing what works best for you. It doesn’t matter how many times you fail because it is a simulation that uses pretend money.
Even though it is a simulation, you need to imagine you are in a real life scenario. Keep your emotions in check, and remain cool and objective before making any moves. If you don’t use a demo as practice before real life trading, there is no point in using it.
A good trading platform should offer an unlimited demo account in which you can practice to your heart’s content. Don’t move on to real life trading, in which your hard-earned money is at risk, until you have become familiar with the whole environment.
Choose the Right Asset
Trading with a broker with numerous assets is a bonus; some would say that it is essential.
Olymp Trade, which is the preferred binary options broker for Indonesian traders, says that choosing the right trading asset is crucial.
Singling out an asset when there are so many to choose from can sometimes be quite a challenge, especially for people who are new to the world of binary trading.
Do not make the common mistake of trying to work with different assets simultaneously. If you do, you will find it harder to focus properly as your attention is divided between multiple instruments. In most cases, if you are lucky, you may end up with mediocre results.
The solution is to find the right type of asset on which to focus your attention. If you can concentrate on one, you are much more likely to be successful.
Let’s suppose, for example, that you decide to focus on currencies. First, find out as much as you can about dollars, pounds, euros, yens, yuans, Swiss francs, etc. Carefully monitor all the economic indicators and how they might influence specific currencies.
Stocks (company shares) also fluctuate according to economic indicators, new government laws, economic embargos, trade deals, and other economic and political events. A good stock trader will read up on as much corporate news as possible. You need to constantly gather and analyze all data that may have an effect on stock market indices (indexes).
The same case goes for trading commodities as well as stock indices. You want to stay afloat of the economic data and a broader picture of the stock market.
Initially, select an asset that you are familiar with; one with which you have some experience. In the world of trading, finance, and investments, knowledge and experience is king!
Every venture has an element of risk, and binary options is no exception. With binary options, there are two outcomes; you either win or lose. This means that if you get careless, greedy, emotional, or impatient, you run a greater risk of losing all your money.
A key concept of risk management is the appropriate trade size settings. The generally accepted risk management rule adopted when setting your trade size is that no more than 4% of your account size should be exposed to the market at any one time.
Therefore, if you have $20,000 in your Binary account, you should have no more than $800 in the market at any given time. If you commit more than four percent of all your money in one go in binary trading, you are exposing yourself to too much risk. Eventually you will come unstuck!
Unlike Forex trading, where you can cut your losses early if the market goes against you, binary trading exposes all your capital in the market.
Most respectable platforms will allow you to begin with a very small deposit. In some cases, your minimum might be as low as just $1.
As you become more familiar with your new trading environment and score some successful hits, you can then start increasing the lot size.
Personal Discipline is Crucial
You might have the best strategies, knowledge, and tools to be successful in binary options, but without discipline, you won’t get far.
What separates successful traders from their amateur counterparts? Apart from knowledge and experience, it is their professional mindset. You need a cool head so that you can see what is in front of you objectively.
Subjectivity and emotions in this type of environment are the kiss of death. Learn to control your greed, impatience, anger, or over-excitement.
Top professionals also make losses. What differentiates them from the rest of the field is that they learn objectively from their losses and move forward.
You Never Know Enough
In all sectors of the economy, top leaders have one thing in common. They say that they are learning all the time. None of them would ever claim to know everything about their business environment.
Binary options is no different. The learning curve is as long as your life. Keep learning, hone your skills further, and continue of developing and testing new strategies. Good luck!