6 Costly and Common Binary Trading Mistakes to Avoid
Given the short time frames offered, Binary Options can magnify your returns as well as your losses, so it is important to avoid costly mistakes. The traders that do fail often commit any number of these 6 mistakes, make sure you learn from them and avoid making these same mistakes as they will cost you money.
1. Not being aware of market moving news
An all too common mistake made by inexperienced Binary Options traders from Singapore is entering trades without any awareness of recently released news or data that could influence the outcome of the trade. Similarly, upcoming news or data releases can have a major impact on the profitability of trades so dismissing this market information can be costly and often burns inexperienced traders. Experienced traders are informed and aware of upcoming news and the potential impact on the market. Some of the news and data releases that can have large impacts include; interest rate announcements, jobs data, quantitative easing and central banks buy/selling currency. Inexperienced traders should not trade around or during important announcements as they more than often get the trades or timing wrong.
2. Gambling instead of trading
Too often inexperienced Binary Options traders treat trading as a form of gambling. The most experienced Binary Options traders do not under any circumstances treat Binary Options trading as gambling. They stick to their own system and strategies and only take trades when they see a trading opportunity, not when they feel lucky or have to win back a loss. Take Binary Options trading seriously at all times, get use to running your trading like you would a business.
3. No money management rules
Unsuccessful Singaporean Binary Options traders will commonly trade without any thought about Money management. Money management refers to how much is being risked on each trade. Experienced Binary Options traders from Singapore will often risk a set percentage of capital on each trade they take and never alter that amount regardless if they are experiencing gains or losses. Inexperienced traders have no money management rules and will increase the amount they risk on each trade as they begin to lose in order to chase and make back the losses. Always have a money management plan in place, a good starting point is allocating 5-10% of your broker account balance on each trade you make, this will give you room to cover a run of losses.
4. Hedging positions
There is a real chance that after you have opened a Binary Option position that the market starts to move in the opposite direction to what you expected, do not worry or panic, this happens to all traders. Some Binary Options brokers allow you to close a trade early, before expiry. If your broker does and you want to exit the trade then you have the ability to cut a losing trade early. If your broker does not allow early closure of a trade then do not get into the habit of hedging (taking a new trade in the opposite direction to your current trade), just ride out the trade. Hedging your trades will only lock in your loss and given strike prices and expiries will be slightly different it will not a perfect hedge. You will in fact be risking up to double your initial investment amount. Having money on both sides of the market has prevented many Binary Options traders from becoming experienced.
5. Entering trades without a reason
Experienced Binary Options traders enter every trade they make with a purpose, they always have a valid reason for making the trade. They are entering at a known level and expecting at expiry time the market will then be at X level. If they do not have a valid reason for taking the trade they do not take it, they know they will get a strong opportunity soon enough. Inexperienced traders enter trades without a valid reason or plan due to boredom or the feeling they need to be in the market. Be disciplined, experienced traders often only take a handful of trades a week, far less than what inexperienced traders take. Have a plan and a reason for entering each and every trade.
6. Not learning from past mistakes
Finally, every trader makes mistakes along the way that costs them money. Do not think for a minute experienced traders do not make mistakes, they do, but what sets them apart from inexperienced traders is they learn never to make the same mistake twice. The definition of insanity is; doing the same thing over and over again and expecting different results. Do not be insane – don’t get stuck in the status-quo if you are unsuccessful. If something is not working as it should try something different; change your timing, reduce the amount you risk on a trade, trade a different asset or change your strategy. Inexperienced traders who refuse to learn and continue to learn will never become experienced when it comes to trading, that is for certain.
By sharing these 6 all too common mistakes that we have seen over the past decade we hope that you can learn from them and avoid making these simple, but costly mistakes.
Your capital is at risk.