3 Dangers of Overtrading 60 Second Options

Trading News Can Make Or Lose Money Fast!Overtrading is a problem that many binary options traders grapple with at some point during their trading career. It poses more of a concern for traders who use very short timeframes however, like those who trade options with 60-second expiry periods. The reason that it is more dangerous for these traders is that there are so many more trade setups which could feasibly result in profits (or otherwise). This can make it tempting to sit in front of your computer 24/7 and take every possible trade setup you can find. I am going to tell you three very good reasons you should think twice before overtrading 60-second options. http://www.binarytrading.org/trading-school/beginner/how-much-binary-trading-is-too-much/ helps you avoid over-trading

  1. Not all setups are as good as they look.
  2. You may spread your resources too thin.
  3. You will probably burn out.

Not all traders who place a lot of trades each day are actually overtrading. Before we can get into a discussion of overtrading, we need to establish a concrete definition for overtrading. Trading does not become overtrading at some arbitrary point where you are taking a certain number of trades per day or per hour. Instead, it is based on what you and your trading system and account can and cannot handle.
 

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Once the frequency of your trading becomes detrimental to you or your profits, you are overtrading.

  • Not all setups are as good as they look.

When you trade 60-second options, even if you have a trading method which tells you when you can and cannot enter a trade based on specific entry rules, the odds are that you are going to find a lot of setups—a lot more setups than you would find if you were trading longer expiry times. You might find dozens of opportunities every hour spread across numerous assets.

There can be a strong temptation in this situation to start placing dozens of trades, even when the entries you see aren’t as good as they look. You may think to yourself, “Well, I am seeing 5 really good trade setups every hour, but there are also about 10 fairly good setups. I could theoretically make three times the profit if I take those setups too!” While the idea of profiting this much faster is very appealing, remember that a fairly good setup is not a very good setup. Take enough of those setups, and they will start impacting your win percentage adversely, and ultimately, your revenue from trading. At that point, you are overtrading, and it will cost you.

  • You may spread your resources too thin.

If you are tempted to take dozens of trades per day, you will probably have some overlap in those trades. If you are wagering 5% of your account on every trade, and you are taking four or five trades at a time, you could have as much as 25% of your bankroll risked at any given time. While there is not anything wrong with this by the strictest definition, it still poses some added risk.

What if, for example, something unexpected happens which has a broad impact? Maybe you neglected to notice a news report coming out, or interpreted its impact incorrectly. Or perhaps there is an event somewhere in the world which sends ripples through the world economy. Even if you’re in two trades on different currencies, one trade on oil, and two trades on stocks, you could well lose all five at once simply because you were invested heavily at the wrong moment in time.

Another problem that can happen when you are in too many trades at one time is managing those trades. This can be disastrous in 60-second trade situations. The reason? Well, what if you need to actually manage your trades while you are in them? This can already pose a challenge for traders who use longer expiry periods. But with each 1 minute trade you are in, you have exactly 60 seconds to make any relevant trading decisions governing each trade (like closing out early if necessary).

That is tough enough with one trade at a time when the trades go that fast. If you are in multiple 60-second binary trades, you can easily lose track of what is going on, or may simply not have enough time to glance between them and properly close out, double up or rollover when necessary. Ultimately this can cost you more money than it makes you. There is nothing wrong with being in multiple trades at a time, as long as it is within reason.

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  • You will probably burn out.

This is arguably the biggest risk which you take when you place numerous trades in a short time period, especially if you have a tendency to overwork yourself and chain yourself to your desk. Some traders thrive when they place a lot of trades, but there is a balance which is important for anyone to reach when trading. It is easy to think, “If I step away from my computer now, I could miss the best setups!” That can quickly spiral into a destructive pattern of behavior.

The risk you take is in exhausting yourself physically, psychologically, or both. An exhausted trader is not a trader who makes good trading decisions. You may start making trades which are not optimal, losing sight of perspective and context, and also damaging other aspects of your life and health. Again, no two traders are alike, and one trader’s overtrading is another trader’s cup of tea. Only you can decide for yourself whether you are burning out from overtrading or whether you are doing just fine. But if you cannot maintain a proper work-life balance, it is a guarantee you will blow your account.

Making good trading decisions is a challenge for anyone who is trading binary options, but it is especially so for those who trade 60-second options. 60-second options can be a lot of fun, and they can also be profitable. But they do make it very easy to lose sight of what you’re doing to your trading account or your life when you become caught up in all the action. So take a few minutes on a regular basis to look at what you are doing and ask yourself if you are overtrading or not. Keeping a journal can help you to evaluate your trading habits. Doing so will help you stay in the game longer and make more money from 60-second options.