8 Reasons Why Binary Options Traders Fail: Read and Avoid!
There can be many reasons for Why Binary Options Traders Fail. Binary options trading has become one of the most popular ways of investing, especially when it comes to non-professional traders. High returns on investment, easy to understand rules and regulations, user-friendly platforms and alluring features make binary options trading easier than ever. There is also the real possibility of using automated trading software where trader only has to set its preferences and make a deposit, and after that, a highly advanced trading software developed by experts places trades on their behalf.
However, have you ever wondered why your binary options trading success is not as great as you had envisioned it? Or why you have not been successful at all? Well, there could be a lot of reason for this. This article will try to shed some light on some of the reasons why binary options traders fail. Knowing them will make it a lot easier to avoid them. So take some time to read about the key success breakers in binary options, in no particular order.
Binary options investing seems easy, and that is why some investors neglect the importance of financial education. Education doesn’t necessary have to be formal, and successful traders or investors aren’t always those with a degree in business or finance. Trial and error strategy might seem like a great idea to the inexperienced trader, but most professionals traders would disagree.
Instead of wasting your money and time on a poor strategy, it is much better to spend some time reading educational articles, and e-books, researching brokers, developing good strategies, graphs and features and following daily financial news etc. Knowledge is power in every aspect of life, and binary options trading is not an exception. Always be informed and ready to learn something new, even if it means executing fewer trades.
Ignoring the Demo Account
Even experienced investors sometimes ignore the demo trading account provided by the broker. They know everything there is to know about binary options trading, right? Well, the truth is quite opposite, as every brokerage firm is different, has a different trading software and platform, various features and trading options. Demo trading account gives the investor an opportunity to research the broker, see how the trades are set and get some general overview over the trading platform. Other than that, most broker lets traders invest virtual money in order to develop their own strategies and see how it feels to execute trades, which means that investors don’t have to spend their real money in order to get accustomed to the trading interface. If the chosen brokerage firm gives its traders the opportunity of a demo trading account, be sure to use it for your own personal growth as a trader.
Lack of Discipline
One would think that financial world is completely emotionless and cold, but just a simple glance on the average investor will reveal that it is not always so. As human beings, traders are prone to get under the influence of their feelings, whether bad or good. Losing streak may cause intense frustration and anger, which usually lead to making unsound decisions and executing forced trades. Winning streak gives investors self-confidence and sometimes over-confidence and they tend to neglect some objective factors that may likely influence their future trades. No matter what your streak looks like, remember that every trade should be well thought-out, with all factors taken into consideration. Be observant, patient, and calm and try to develop an investment plan as soon as possible in order not to use your funds irrationally.
Keeping Investments On the Bare Minimum
One of the alluring attributes of binary options trading is that they are available to everyone, and not just traders with significant capital. Most brokers require a minimum deposit of about $200, which is quite low compared to other types of services available on the financial market. One would think that the $200 will simply multiply as they progress as traders, but they would be wrong most times.
Even if initial deposits are very low, required minimum investments in some cases can be as high as $50. Now, if we compare that to the minimum deposit of $200, it is easy to see that it enables an investor to execute only four trades. Other than that, minimum investments bring minimum profit in all types of trading, and binary options trading are no exception to that rule.
With small investments, it takes a bit longer to accumulate significant funds on the account, which can make traders impatient and nervous, forcing them to place irrational trades in order to achieve more in less time. Besides, binary options traders must always count on possible losses and know that the minimum deposit now seems wholly inadequate for serious trading and profit making. Traders, no matter how experienced, should try to research various account types offered by various brokerage platforms and choose the one that suits their needs best.
Absence of Plan
Even if binary options investing sounds simple, don’t be deceived as it is still a type of financial trading that requires a lot of planning. Many users think there is nothing more to it than registering, making a deposit and placing trades, but a good plan is incredibly important to be a successful trader. Planning is, along with education, one of the most vital segments of binary options industry. Be sure to develop a plan about how much, when and where to invest the money. Also, include some risk management strategies, and always count on possible losses down the line. Traders must be ready to revise their plan at any time if they see it is not working for them and losses are simply getting too high.
We must admit that there are some irresponsible brokerage firms who use false advertising and promise unrealistic amounts within a short period of time. These brokerage firms make investors believe that binary options trading is an easy way to make a lot of money. In reality, binary options trading is a profitable way of trading, but only if the trader is educated, responsible, and patient. In order to avoid scam brokerage companies, make sure to trade with a broker who is registered by some of the regulatory bodies like CySEC. Investors must be aware of false promises and their own greed, and realize that binary options is still a type of financial trading where no one becomes rich overnight. Also, investors must take their invested amount into consideration, as bigger investments make a bigger profit.
Overlooking the Changes
It is easy to forget how dynamic the binary options industry is, and for that reasons investors must be ready to reevaluate their trading plan, chosen strategy and executed trades in every moment. Changes should not be seen as something hostile, but a chance that enables them to make more money if they are ready to adapt to the new opportunity. Proper education and detailed plan and strategy may reduce the risk of unexpected changes, but they are not a guarantee. Also, the investor should not be scared to use additional features offered by the broker as rollover, double up, early closure and sell in order to adapt to the prevailing circumstances on the market.
Inadequate Money Strategies
It is almost impossible to become a successful binary options investor without implementing a sound strategy, but traders often forget that having a sound strategy alone is not enough to succeed in the financial market. An investor who has a good strategy knows what is going on in every moment of the trade; is aware of all the possible risks and knows what the possibilities are in case the trade takes an unexpected turn. Successful investors know how to manage all possible risks, and are keenly aware of high-risk trades. They never place all their capital into high-risk trades, but only the smaller amount. That way they protect their funds from unexpected high losses, and always have a backup with more conservative trades, because losses, regardless of how small, are still affecting their balance.
Why Binary Options Traders Fail – Conclusion
Binary options trading can be an awesome experience if one is aware of the effort that has is required in order to make meaningful returns on investment. This type of trading is completely user-friendly, but that does not mean that it should be taken easily and without prior education and research. Investors must be ready to adapt to the completely new trading environment and to take their time, as forcing trades is not the best strategy if you want to be successful.