Traders enter the world of binary options from many different gates. Maybe you have already traded Forex or stocks or something else, and now you want to try your hand at something new. Or perhaps you have never traded anything in your life, and binary options trading appeals to you because it looks simpler than other types of trading. Or maybe you have tried your hand at poker and are interested in binary options because like poker, it is something you could do for fun, but might also be able to make a living at.
What is interesting about investing, and what many investors do not realize, is that any investing activity you get involved with is more or less the same. The process of investing in binary options may be quite distinctive from the process of investing in stocks or Forex, or even playing poker, but the principles are the same, because you are still dealing with patterns and unpredictability. If you have traded successfully before, or even gambled successfully before, the skills you picked up will help you with binary options. Here are 5 secrets to succeeding with any type of investment, binary options included.
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1. Manage your risk exposure
Bankroll management is a must with any business where there is risk involved. This is true no matter what form that business takes.
When you go to the casino to play cards, you walk in with a set bankroll and amount you are going to allow yourself to invest on the game. This allows you to reduce your risk exposure and increase your chances of ending the night profitably.
When you trade Forex, you set a stop loss with every trade that limits your risk.
As a binary options trader, you also manage your risk. First, you only deposit as much money as you can afford to lose. Secondly, you calculate what about 3% of your account is, and you make sure you never risk more than that on any binary options trade.
At least that is how you should do things if you want to win! There are a lot of gamblers and traders who do not manage their risk, but they do not succeed in their investments.
2. Stay flexible.
In any business at all, it is important to stay adaptable to change. Nowhere is that truer than when it comes to the markets. Markets themselves are adaptable, and mold themselves around events. They respond to clock time, but they also respond to “event time.” When something changes in the real world, when sentiment changes, the markets adjust. You as a trader also need to be ready to adjust. That is true whether you are a stock trader on Wall Street or a binary options trader sitting at home in front of your computer. If you are not ready, the next wave of change will wash you out to sea.
3. Pick a strategy and use it consistently.
There has never been a single person in the entire world to succeed at any game of chance with nothing on their side but intuition. You could say it is just statistically improbable, but do you really think you are that lucky? And if you were, would you really be a success? Everyone seems to have an anecdote about some friend or family member who bet big on gut instinct and made it big.
What they often do not talk about is how that same person lost it all on another big bet a few years later, or burned through the money because they did not know how to manage it. They also do not talk about how unsatisfying it ultimately is to know that the only reason there is money in your life is because of chance. There is no feeling of reliability, of security. That comes from knowing you can repeat your wins. That is real success.
That is why all real winners have a strategy they use consistently to generate consistent, repeatable returns. Stock traders have trading techniques, Forex traders have them, commodities traders have them, binary options traders have them. Professional poker players develop strategies as well. Like money management, this is a way of reducing risk.
4. Start trading with realistic expectations.
Successful traders and gamblers do not start out on a business of risk expecting to make a million dollars overnight. They know they are in for a long journey which will test their persistence and commitment to success. This is even true for poker players, many of whom practice for years without success before they start winning consistently. Unlike the poker player, you do not have to worry about losing a ton of money while you are learning how to trade, as long as you trade on a demo account first! This is something that Forex traders know well.
It is common for Forex brokers to offer demo accounts, and it is increasingly common for binary options brokers to offer them as well. Brokers are starting to realize that binary options traders are getting smarter and are coming to expect an opportunity to hone their skills without losing cash. When you have realistic expectations, you do not rush. You take your time and trade without profit or loss until you start seeing consistent virtual profits. That is when you start trading real money, and only about 3% of your account. You understand that it is going to take some time to build up your account and start bringing in the big bucks.
5. Stay the course.
Even if you do get into binary options trading with realistic expectations, you still may be surprised by just how long it can take to start trading successfully. It may take you months or even years to reliably profit, and if you are jumping into this business with nothing more than a couple hundred dollars to get started with, you are going to be trading small amounts of money for a long time.
Successful traders stay the course, even when they discover that they are on a years-long journey. It is possible to start investing in binary options on a shoestring budget, as it is with Forex, as it is with playing poker (thankfully trading binary options costs less than trading stocks!). There is no way to jump from $200 to $200,000 in a year, though. You are going to need to be patient and hang in there.
Ultimately, the art of trading binary options is very much like the art of managing any other business of risk where patterns are important. Take any previous experience you have with other forms of gambling or investment and bring them into play. No, you will not be able to do things the exact same way, but that is just another area where adaptability comes into play. You can adapt the basics—the right mindset, risk management, and a strong strategy. It may be a different strategy altogether, but it is still a system, and you need the same discipline to apply it and get amazing results. It all comes down to finding ways you can predict patterns and steer clear from chaos.
If you have no previous experience in Forex or other types of investing, you can still benefit from the similarities. How? You can expand your education to encompass resources designed for other types of traders. You may be surprised just how applicable a book about the stock market is, or a forum designed for Forex traders. You can learn from these resources, and from traders who use and design them, even if they do not trade binary options. Take advantage of these opportunities, and you will become a better binary options trader!