Promises of high profits and lucrative rewards will attract almost anyone. The truth is that binary options can, in fact, be very profitable. However, there are certain binary trading pitfalls you need to be aware of before you get started on your path to riches.
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In this article, we will provide you with an overview of the top 10 biggest mistakes people make when trading binary options. Unrealistic Expectations Because of the aforementioned ads and marketing hype, novice traders often have unrealistic expectations about what way of making money is popular on the Internet mistakes newbies in binary options trading.
Some are even entirely discouraged, and give up on binary options altogether. It is imperative that you inform yourself about the actual mechanics of binary trading.
You should know what you are getting yourself into, before you mistakes newbies in binary options investing your hard-earned funds. Not Having A Trading Plan Venturing into a new field without preparing yourself is unwise — or, to put it bluntly, stupid. The same principle applies to financial markets. You should always have a sound plan when trading binary options.
In other words, your investments will go down the drain if you do not employ a proven and reliable trading plan.
However, in some cases the longer path must be taken. Binary options trading is an area where taking shortcuts may hurt you badly in the long run. Some traders have a false idea that they will be able to learn things as they go.
In order to protect your funds and minimize the risks, you should always perform various tests of the trading platform you plan on using. To put it simply: check everything! Taking advantage of a binary options demo account will allow you to use virtual money while testing out various strategies.
My Biggest Binary Options Trading Mistakes - Read and Avoid
You will also have an opportunity to explore the features of your chosen trading software for free i. Poor Money Management Taking extra care of your money is a perfectly logical and reasonable thing to do.
However, not all binary traders are cautious when it comes to best binary options platform deposits. Most spend more than they can afford, and this is one of the most common pitfalls of binary trading. That is why experts recommend the use of money management strategies.
Learn appropriate exposure practices, lest you jeopardize your trading capital. Money management in trading is a skill which needs to be perfected through time, with the personal experience and knowledge you pick up on the way. However, even just relying on common sense can go a long way here.
Over-Trading Traders who lose a significant portion of their available funds often fall into the trap of over-trading. This means that they place too many trades in a short time frame, often in an effort to make up for their recent losses. However, this will inevitably result in catastrophe more often than not. You can avoid this dangerous mistake by investing only when the opportunity fits your trading criteria i. Greed can often motivate one to place trades too often.
In these moments, it is vital that you exercise emotional control. Under-funding On an entirely opposite side of the spectrum from over-trading stands under-funding.
As the name clearly suggests, this mistake is associated with investing too little of your trading capital. Playing it safe and limiting your profits are two different things, and you should learn the distinction early on. In essence, traders who under-fund their investments are using minimum amounts of money, even on the safest of trades.
This typically results in low profits and a waste of time; in other words, inefficiency! If you want to earn money with binary options trading, a healthy dose of risk is necessary — there is simply no avoiding this fact.
Use Fundamental Analysis
You will never learn to swim if you spend all your time waddling around in shallow water. As they say, no risk, no reward. Keep it calculated, though! Emotional Turbulence In order to survive losing streaks and bounce back, you must practice emotional discipline. Only those traders who are able to keep their cool in stressful moments will come out as winners in the end. In any form of trading or business in generalemotional spikes are known to happen.
1. Failing To Trade With Proper Preparation
Unfortunately, a lot of traders make the mistake of placing trades when they are feeling angry or anxious. This emotional turbulence will undoubtedly affect their results in a detrimental way.
It is vital to wait for the right market conditions when investing your funds. Currency pairs, like stocks, indices and commodities, are immune to your emotional states; their values will fluctuate according to certain variables that are out of your control.
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Your anxious behavior will not have an effect on the prices of those assets — it can only cause you to lose your precious money. If you find yourself flustered, refrain from placing your trades. Put on some relaxing music, take a walk around nature or engage in meditation. Calm your mind and return to the field with a clear vision. This is how winning traders play the game! Over-Thinking Just as being overly emotional will do you no good, over-thinking will also have an adverse effect on your portfolio.
Relying on too many sources can be distracting and confusing, and this will leave an impact on your trading results. Novice traders are especially prone to making this kind of mistake.
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Falling For Scams Another important thing to look out for when getting into binary options is the always-present danger of scammers. All sorts of robots, signals providers, and account managers are nothing more than a nicely prepared scam operation, and traders often make a mistake of falling for these tricks.
However, it must be done in the right way. Research has proven that most of the newbies end up making some mistakes which result in unpleasant experiences in binary trading.
Similarly, various promotions and bonuses can be deceiving as well. Take care to read the fine print when you sign up for a bonus deal! Your account can potentially be drained long before you even receive those trading incentives.
Binary options traders often fall into cycles of losses which never seem to end. You might swing wildly between confidence one day and despair the next as you watch your wins and losses stack up seemingly without rhyme or reason. If you are starting to feel like your winnings are at the whims of chance, it may be because you are placing yourself in that position.
Choosing The Wrong Broker Not all brokerage companies are the same, and aspiring traders often have problems picking out the right ones. Shady and mistakes newbies in binary options brokers can severely affect your trading portfolio; in many cases, they will wipe your account clean in no time. Also, a lot of traders are making a mistake of using unregulated brokers.
These brokers often give various incentives in an effort to lure you in, to compensate for their lack of safety and seriousness. As a general rule of thumb, if a broker is not regulated, stay away!
2. Not Having A Trading Plan
Every trader should perform the simple, but vitally important, task of doing research and reading reviews before putting his or her name on the dotted line. It is imperative that you find a reliable and professional broker that you can work with long-term.
We recommend signing up with 24option. You can read our review of them here. The Bottom Line As much as these pitfalls may sound intimidating, do not be too worried.
Binary trading is an exciting and rewarding activity, as long as you take a few important precautions. Keep these in mind, and enter the exciting world of binary options with an added sense of safety.
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