But what about the pitfalls? As a beginner, what do you need to know?
To answer that, we’ve come up with a list of common mistakes to avoid when it comes to binary options for beginners.
Trading without a purpose
You wouldn’t aimlessly walk into traffic on a busy highway. Likewise, you shouldn’t blindly step into the fast-paced world of binary options without a plan.
Consider this. Relying on intuition, you would have to correctly guess at least six out of every ten trades in order to be successful. Can you consistently predict 10 coin flips with better than 60% accuracy?
No. Because that level of success is simply not sustainable based on guesswork alone. If you base all your investments on gut feelings, you will lose in the long run.
By contrast, a solid plan helps you find patterns in the chaos so you’re ready to strike when conditions are prime. Similarly, you won’t be shaken by the market’s ups and downs, or make impulsive moves that will cost you money.
While we’re on the subject of impulsive moves, another big mistake is…
Humans are naturally emotional creatures. But there’s no room for emotion when it comes to binary options. And recognizing the difference between a logical and emotional response can mean the difference between making and losing money.
A common emotional behavior for beginners is to chase your losses. Like a gambler who only goes deeper into the hole trying to get their money back, you’ll only throw more money away if you overreact to a volatile market.
It goes both ways, too. As a newb, it’s easy to fall into the trap of feeling like you can’t lose after a series of successful trades. This overconfidence can cause you to go outside of your investment plan and make questionable choices you would normally avoid.
Of course, there’s definitely an intuitive element to trading. But those gut decisions are only effective when safely applied within an existing framework. They need to be guided by structure.
But even if you make the mistake of an emotional trade, the bigger issue is…
Not learning from every trade you make
The truth is, not every trade is going to be a winner. You’re bound to make some mistakes as you learn what to look for in binary options.
However, it’s important to analyze your history and learn from it. If you don’t, you’ll only find yourself repeating the same mistakes over and over again. (And losing your money–over and over again).
That applies to your successes too, though. When you look back on your trade history, it’s important to see exactly where you went right and what market conditions prompted you to succeed.
As a result, you can improve your trading skills and make better decisions going forward, while also avoiding the pitfalls that took you down in the past.
But before you put any real money on the line, it’d be a major mistake to start…
Trading without testing
Many beginners jump right into trading without any prior experience.
While that might work for some, new traders are prone to panic and poor decisions. Because they’re not comfortable with the process yet, and quite honestly, they don’t know what they’re doing.
That’s why it’s not enough to just randomly pick an approach to binary options off the internet and hope it works for you. No matter how many people might sing its praises online, there’s no one right method to trading for everyone.
That’s why demo testing is vital for beginners.
You can use virtual money on a free account to get comfortable with the trading process. Then, you get to see how your system will perform in a variety of market contexts and learn to recognize the signs for good trade setups.
All without any money on the line.
Smart binary options for beginners
Now that you’re up to speed on some common beginner mistakes, make sure your plan doesn’t fall for any of these binary strategy myths. Or head over to Binary Options 101 to learn more about making less risky trades.
We understand binary options can seem pretty complicated at first, so please don’t hesitate to contact us with any questions.