The Psychology of Binary Options Trading

Published: 25 May 2016 Updated: April 23, 2023

Hello, dear fellow traders! In addition to mastering the skills and strategies to conduct transactions with binary options In order to gain experience in this field, you will need to be able to fully control your own emotions - gambling, greed, fear, etc. Their combination is usually referred to as "the psychology of trading". Their totality is usually called "psychology of trading". In this text we will discuss a number of purely practical aspects and give advice on how to cope with our main enemy - ourselves.

The Psychology of Binary Options Trading


You should only risk with money that you are already prepared to lose

Often, after earning a dozen dollars on a demo account, beginners immediately move on to real operations with binary options. They tend to have the wrong feeling that they have gained the ability to achieve similar results with amounts of any order of magnitude. They build up the size of their deposit, often take credits and... lose everything.

And why? Because they become nervous and attach too much importance to their finances. As the amount increases, so does the fear of losing it. The result is rarely positive. This is why it only makes sense to risk amounts that you are willing to part with. We're not talking about the entire deposit, but only about specific transactions.

We are discussing here money management and bring it to your attention that the amounts you are risking with a single bet should not be critical for you. Otherwise you will find yourself emotionally attached to a specific bet size, you will begin to see non-existent signals, opening, as a consequence, losing positions.


You can't think of trading as a game!

Although outwardly binary options by their nature are very similar to roulette, because here you make bets, just like in the bookmaker's offices. But trading cannot be perceived as a game, it is a serious business. A business with profits and losses in loss-making trades, which are bound to happen. The difference is simple. We play for fun, we trade for the sake of profit. And to get it reliably, it is necessary not to play, but to work diligently.

You are required to have trading strategy. You should not enter the market without a good reason. It is necessary to have a money management and a real trading plan. You should prepare for any deal, and as seriously as possible. Trading Binary Options is conducted solely according to its trading plan.


There are bound to be losing trades, they cannot not be

There are no strategies without losing trades. All of the most experienced professional traders occasionally make losing trades. If you haven't had them yet, you're just lucky. And it means that you are doing something wrong. Therefore, when you have loss-making trades (within reasonable limits, of course), it's a good reason to be happy.

Naturally, the number of profitable trades should exceed the number of losing trades. If this is not the case - you should reconsider your own trading strategy. And the ratio of 4 losing trades to 6 profitable ones should be considered quite normal. Here it is not only possible, but also necessary to work. One should not strive for the complete absence of losing trades. Because it's not even theoretically possible.

The Psychology of Binary Options Trading


Tilt - negative and positive

Tilt is a term that comes from poker. A positive tilt means that a person experiences a succession of luck and fortune. All the trades he opens are profitable. Alas, the result of such a situation is often a feeling of omnipotence. He begins to take excessive risks, increasing the size of bets, which rarely ends well for him. He opens deals in the absence of signals, he enters the market without any good reason. The result - large losses, loss of solid sums.

A negative tilt means that you are in a "black hole". Deals are entirely loss-making, and the mood and motivation is falling. The subject is trying to win back, fighting the market, taking revenge on it. Again transactions are opened unnecessarily, the result is even greater losses than in the first situation.

Such conditions should certainly be feared. About the fight against them below, it is time to move on to the next point of the article.


Don't go in without a reason!

This has already been mentioned above. If you "sort of feel" that the market is going to experience growth, there is no need to enter. You can't trust your feelings, which have no real and, most importantly, objective basis. You should only enter as part of a strategy, according to fundamental or technical analysis, based on logical inferences and not otherwise.

For example, we wait for the news release and use the "Range" option because we believe that the market will go into a rut after the news release. Naturally, it must come out of the range. Here is a specific example of making decisions based on trust in logic. Let's repeat - entering the market only for good reasons. These include fundamental or technical analysis, strategy signals, and logical conclusions based on objective factors.


You can't always be right!

If you constantly strive to prove to someone (the market, your friends, your girlfriend) that you are undoubtedly right, you can expect nothing but very negative consequences. Well, if you're wrong, a day later no one will be interested. After all, nobody cares. But such events will turn out to be a fraying of nerves and, of course, financial losses.

You should never try to prove your own rightness to anyone. Especially the market or people you don't know at all.

Traders have a saying: "Don't marry your position! In operations with binary options it is also completely true. We calmly accept our own wrongdoing, close the wrong trade, open a new one when another signal appears. That is all. We do not blame ourselves, we do not prove anything to anyone, especially - that you are a tough trader, a market bully. We calmly do business, not play roulette.


Limiting gains and losses

A good way to combat emotional pressure and overcome negative tilt is to put a limit on the amount of income and loss. It's not about goals, it's about limits. What does this mean? Suppose you limit your profits to a hundred dollars a day. If you manage to make it by the end of the day, then trade stops. Once again, this is only a limit, but by no means a goal. If you decide that you're obligated to make a hundred dollars every single day, don't expect good things. Because you're going to try by any means to earn exactly that amount. What if there are no signals in the market that day? You will start looking for them in places where there were none, open a lot of unnecessary positions, and you are guaranteed to close them with losses.

Similarly, we set the framework for losses. If you lose 20 percent of your deposit, stop. No more work today.

Such a framework will help avoid negative tilt. And positive tilt, too.


Fast is when it's slow but continuous!

To conclude, it is worth recalling this Japanese proverb in the subtitle. It is unrealistic to make all the money in the world in a week, so you should not strive for it. Quietly, increasing their capital percentage per day, moving the business. Do not strive for exorbitant profits. Earn a little, but steadily. Limit losses and profits, work within the framework of the trading plan and your strategy. Remain calm, and your success is guaranteed!

That's it! See you again!

3.70 / 3
Leave a review