Psychological Aspects of Binary Options Trading

trading psychology

What concerns the process of binary options trading, there are several issues here that need to be paid attention to. All these aspects are merely psychological. Besides being disciplined, a trader should never forget that he or she has internal enemies that can prevent him or her from getting a profit.

 

These enemies, first of all, are:

  • Greediness (i.e. the desire to get as much profit as possible without taking into consideration the market situation)
  • Passion ‒ the desire to win back quickly when the trader has suffered losses
  • Inability to assess one’s own abilities correctly
  • Lack of faith in one’s own abilities

Of course, this list of psychological aspects of trading binary options is far from being complete, and in the section “Learning Binary Options” it will be significantly expanded. Then we’ll consider each aspect in detail. Thus, as it has been mentioned above, discipline is a priority factor which is important for everyone. The lack of discipline is a problem that everybody may face.

Another problem that can have a significant impact on a trader's job is greediness. Perhaps this feeling is characteristic of the majority of people as well. However, it has a very pernicious influence on the final result. This problem especially concerns beginners who may be excessively encouraged by the progress in the work and will believe that now they can acquire unlimited riches. It leads, in its turn, to the fact that traders are starting to constantly break the rules of the strategies, which results in losses in the long run.

As regards the overestimation of one’s own abilities and the desire to retrieve one’s losses quickly in case of failure, such things also happen to beginners. Sometimes, on getting their first profit in the market, traders begin to think that they have found their “Grail” and will continue trading only profitably. It is a common delusion and it often leads to the loss of the deposit. Very often, when trading small cap stocks, traders begin to overestimate their own abilities. Meanwhile they forget that the psychological load will increase as they increase their deposit out of their own investments. To lose one hundred dollars is not the same as to lose a thousand dollars. It is necessary to keep it in mind all the time.

Finally, an important issue is that traders are often not confident in their abilities. This psychological aspect is equally important as overestimation of one’s own abilities. A trader appears to lack self-confidence after he or she has suffered a few losses. Also, a serious blow to the trader’s psyche would be the loss of the first deposit. One shouldn’t be afraid of this. Of course, if a trader follows all the rules, he or she may not fear the loss of the deposit. However, many traders step on the right path only after they gain their own experience.

The lack of faith in one’s own abilities can lead to the following situation: having developed their own strategies, traders cannot find signals with them. Uncertainty may appear when you read other traders’ opinions in various forums. This is especially true in cases when the opinion of one trader is completely different from the opinion of others. This fact does not mean that the trader is wrong. It may be far from it. For example, his own trading strategy shows him that it is necessary to buy a Call option. The signal is very clear. But traders in the forum can recommend buying a Put option. What should one do in this situation? The advice is: strictly follow your own signals. Even if the trader appears to be wrong, he will learn from his mistakes and will know where exactly he made these mistakes.

Thus, psychology is an important aspect in a profitable trade, so it is necessary to pay no less attention to it than to such types of analysis as technical or fundamental.

© 2012-2014 options-stock-trading.com