Trading Mistakes That Traders Should Avoid.
- Unrealistic Expectations
- Trading on a too small initial Investment
- Going after the Bonus
- Opening way too many trades
- bad money management
- Gamble instead of trading
Today many people are trading and new traders are born every day. Due to some smart “make money” advertising and listening to some friends that actually made some money in trading binary options, many people give it a go without actually knowing what they are doing.
For some reason all these traders loose and always lose their money because of the same reasons. If you would try to avoid these bad habits you might well be on your way to become a profitable trader. But if you ignore them then you will be simply gamble you money away and leave this market alone desolate and discouraged of ever trading again
Do not expect to be rich overnight, it simply does not happen, thou I have known a few traders that got lucky or had an amazing strategy that provided them with large profits, this is not a given and they have paid their educational fees in many lost trades before they got to this level. If you as a new trader expect to make a 100% within a day you are bound to take risks and the odds are just too low to be right all the time. If you expect to make a 10% profit monthly you will be able to get there, so don’t start with expectations that are simply not feasible as you will be disappointing
Trading on a too small initial Investment
Every broker has a minimum amount that you need to invest in order to be able to trade. There are of course brokers that allow you to put just $10 but think about it, even if you get to a 20% profit on this amount you would only have earned $2, which is hardly worth the risk. it takes money to make money and without some initial funds you will be playing around with peanuts, let me put it this way, you have become a good trader, and are in the money more of the time than not, since the payout is not 100% you need to make around 70% of your trades in the money to be profitable. The moment you reach this level and you trade with small amounts you have gained actually almost nothing. Again with money you make money, simply as that
Although there are minimum investment amounts imposed by binary options brokers, this should not be a limit to the much you can invest in this trade. In most cases, under funding your account can actually limit your chances of profiting from this trade. For you to execute a more balanced money management strategy, it is advisable that you fund your trading account with more funds than just the minimum deposit amount required by the broker.
Going after the Bonus
Most of not all Binary options Brokers offer Bonuses on the initial deposits. This is nice as you get to trade with more funds then you started out with. But this comes with a catch. You are in general required to reach a certain amount of volume before you will be able to withdraw your funds. This ranges from 20 times the amount of the bonus to 50 times with some brokers. Taking the highest bonus money does not get you to earn more money it gets you to trade longer and that is not the same thing. More here about how bonuses work
Opening way too many trades
In the binary options market, the more trades you open do not automatically translate in creating more profits. It is simply not a smart trading strategy. It is better to do your homework and open a few higher trades then opening a huge amount of smaller trades. Look at it from this side, a good traders is making his or hers analysis waits till the market is just right before entering this. This means there is time invested in opening the trades, if you are able to do this very fast then still you will not be opening one trade after another. So if this is the way you are trading you basically are gambling and in the end the odds are against you. Let’s say you are profitable 50% of the times. Then still your funds will be eaten away as the payout is not 100% but more between 70-85%
Bad Money Management
This is a crucial element of becoming a profitable trader. All too often this part is ignored and before you know what hits you a few bad trades has cleaned you out. You need to avoid this at all costs. In general I believe in the 5% rule, which means that you will not ever invest more then % of your entire portfolio on any trade. You want to get you own strategy on this of course but when trading with real money this is really something you want to focus on and stick to it. Over confidence with a few profitable trades will more often than not result in traders pushing to many funds in a few trades which as a result would take away all your hard earned profits and might clean out your account.
Gambling instead of Trading
Since there is a clear relation between gambling and trading binary options, for many traders they do not know when they are gambling as they believe they are actually following the markets and the charts tells them to what to do. But it takes more than that. A feeling that the market will go in one direction does not translate in profits that often. You want to have a clear strategy and do your homework. Just opening trades because you have now time to trade is never a good strategy.
If you want to make money in trading Binary options and this is very well possible, you need to approach this as any business, which it essentially is. You need to be smart on what you are doing and not take risks that you would normally in any other type of business venture would not take.
In short don’t gamble.