Binary Options Trading Blog

What Is The Biggest Danger Of Binary Options Trading?

cycle of emotionsDo you know what is the most dangerous aspect of binary options trading? The answer will surprise you.

I’m going to tell you in a moment, but I first need to ask if you have started working on your trading business plan yet?

As mentioned in my last blog post, having a disciplined, rule-based trading plan for your options trading should be the first thing you do before investing a single dollar in your trading account.

So, if you haven’t yet started writing out all the details I shared with you in my last blog post, please put that on the top of your “to do” list.

Look In The Mirror

Now, about that biggest danger of binary options trading… Do you know what it is?

Look in the mirror and you will see the answer. It’s yourself!

More specifically, it’s your personal human emotions.

There are three psychological states of emotions that drive most individual decision making in binary options trading.

They are…

Greed, Fear, and Regret

Since the forex market is made up of individual human beings who tend to act in similar manners, a group is formed.

It is only the group’s opinion that matters during a trend, but it is the individual trader’s job to identify the subtle clues as to when a market is about to shift direction.

The clues are there, but they are subtle. An awareness and detailed understanding of these emotions is what keeps the astute technical trader out of trouble by providing a means to identify individual weaknesses.

Let’s take a closer look at these emotions, and provide examples of how they influence a trader’s ability to consistently make money.

Greed

Greed is commonly defined as an excessive desire for money and wealth.

In trading terminology, it can specifically be defined as the desire for a trade to provide an immediate and unrealistic amount of profit.

When greed sets in, all a binary options trader can focus on is how much money they have made and how much more they could have made if they had risked a larger amount of capital on the trade.

Greed also frequently leads to ignoring sound risk management practices.

Perhaps worst of all, greed has an evil tendency to boost one’s ego to dangerous levels.

The moment that your ego gets involved in trading and you start to think you are infallible, you’re headed for losing trades because you become overconfident.

Fear

Fear is defined as a distressing emotion that is caused by a feeling of impending danger, which results in a survival response. This holds true regardless of whether the threat is real or imagined.

Fear is one of the most powerful of all human emotions, and it usually sets in after one a suffered a series of losing trades.

Fear frequently causes the trader to panic, which leads to poor decision-making for future trades.

Realize that losing trades are part of the business, and don’t let it affect the psychologically when you have a losing trades. Simply move on to the next one instead.

Regret

Regret is defined as a feeling of sadness or disappointment over something that has happened or been done, especially when it involves a loss or a missed opportunity.

The negative implications of this emotion are obvious. It is only natural for a stock trader to regret taking on a losing trade or missing a winning trade.

But what is important as a trader is to not hyper focus on losing trades or missed opportunities.

If you lose money on a forex trade, then you should simply evaluate what went wrong and move forward.

Other than the lessons that can be gained from evaluating each trade, there is no point to spending further time regretting the decision to enter the trade.

It is also human nature to feel regret when an opportunity is missed.

If you miss a winning binary option trade, then you must simply move on to the next potential trading opportunity.

Circle Of Death

When technical traders allow regret to rule their thinking, they tend to “chase trades” in the hopes of still being able to make money on the position by re-entering the same trade, even if nothing has changed to increase the chances of a trade working in their favor.

This is also known as revenge trading, a deadly cycle of continually entering losing trades for no reason other than one’s ego.

Again, successful binary options traders always keep their ego in check.

In my last blog post, I said one of the first and most important rules of binary options trading is to have a clearly defined and written trading plan. Do you know why?

The reason you must do this is because it keeps the above emotions of greed, fear, and regret out of your trading decisions. This, in turn, leads to more consistently profitable binary options trades.

In my next blog post, I will share with you an amazingly easy rule that will always keep you out of trouble.

How is the game of baseball related to the business of binary options trading? Tune in to my next blog post and I’ll tell you.

Again, the answer may surprise you.

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