Many traders have made binary options’ biggest mistakes before you. There’s no good reason why you should repeat them. In this article, Binary options biggest mistakes, you will learn the biggest mistakes binary options traders make and how to avoid them.
The biggest binary options mistakes are:
- Investing too much on a single trade,
- Trading without a strategy,
- Not knowing your character,
- Failing to use all binary options types,
- Not starting with a demo first.
By learning how to avoid these mistakes, you will be able to trade much more successfully.
Binary options biggest mistakes: The 5 biggest mistakes
Let’s look at each of binary options 5 biggest mistakes individually.
Mistake 1: Investing too much on a single trade
Binary options are a numbers game. Your goal is to win enough trades to make money, but no trader wins every trade.
To make money with binary options, you have to win around 60 to 70 percent of your trades, depending on the payout your broker provides you with. That means, even with a money-making strategy, you will lose up to 4 out of 10 trades.
By the sheer power of the odds, these losing trades will sometimes come in a row. You will lose 4 trades in a row, or you will lose 7 out of 10 trades. While such a losing streak is not a problem for your overall success – you will eventually also win 5 or 6 trades in a row or 9 out of 10 trades – you have to prepare for losing streaks. If you invest half of your overall capital per trade, losing two trades in a row could dig you into a hole that it would be impossible to come out of.
Even if you have the odds on your side, you need to keep your investment per trade low enough to allow the odds enough time to develop. Invest a small percentage of your account balance per trade, ideally less than 5 percent, and you will be able to avoid the biggest mistake binary options traders make.
Mistake 2: Trading without a strategy
So far, we have talked about how to trade once you have the odds on your side. A strategy is what will get the odds on your side.
A trading strategy defines how you find a trading opportunity and how you trade it, thereby making your trading predictable and comparable, allowing you to know which percentage of your trades you will win. With a good trading strategy, you will know that you will win 70 percent of your next 100 trades – the ideal basis for your binary options success.
Traders without a strategy trade randomly. Never knowing why they make or lose money, they are unable to improve their trading and will, in the long run, lose all of their money.
Mistake 3: Not knowing your character
Some trading strategies are risky and some are safe. Picking a strategy that suits your character well is crucial for your trading success.
Understandably, many new traders find it difficult to match their character to a strategy. Having never traded binary options before, these traders have to learn what they like and can do first, before they can find the right strategy.
Make sure to go through this process before you invest big. Otherwise, you could lose a lot of money before you get to the later stages of your trading career.
Mistake 4: Failing to use all binary options types
Binary options offer the right tool for every situation. Limiting themselves to a single tool is one of the biggest mistakes traders make.
High / low options, for example, are the classic low-risk binary options type. Because of their low risk, though, high / low options also offer lower payouts than other, riskier binary options types. One touch options, for example, provide higher payouts but also require a bigger movement.
To maximize your profits, you have to learn to use the right tool at the right time. The market will move only a little bit? Use high / low options. You expect a strong movement? Maximize your returns by using one touch options.
Understand when to use which binary options type, and your profits will skyrocket!
Mistake 5: Not starting with a demo account
All of the mistakes listed above are a result of people trading without a clue on what it takes to trade successfully. It is as if you would take your first flying lesson in a high-powered fighter jet during the war – it makes no sense.
There is, however, a better way. With a binary options demo account, you can try binary options with play money instead of real money, thereby creating a risk-free environment for you to learn the basics and become an expert before you invest real money.
Traders who start their career with a binary options demo account will automatically avoid all of the mistakes we listed above. Or, more precisely, they will probably make these mistakes, but they will make them in the risk-free environment of their demo account. When they start trading with real money, however, they have learned that they should not invest too much on a single trade, that they need a strategy, which strategy suits them, and so on.
A binary options demo account can be your autopilot to avoiding the biggest binary options mistakes. To get a demo, check our top list of the best demos currently available.