Binary options trading are financial transactions in which the trader or investor speculates on rising or falling of values. It is similar to the trading of shares, the only difference being that in binary options, you get to predict whether the prices will rise or fall at a certain point in time.
If you predict correctly upon expiry of your option, then you will be paid the amount that was previously determined. On the other hand, if your prediction is not correct, then you get to lose the money. Binary options popularity is growing fast because it is simple, more profitable and involves less risk.
However, even though this form of trading can make you a millionaire overnight, the opposite is also true meaning that you lose a lot of money over a short period of time. The difference between being successful and losing your money lies in the strategies that you use.
So are you planning to venture into binary options trading? If yes, then today you are landed on the right page. In this article, we are going to give you the top 5 binary options tips that you should know before you start trading.
1. Set realistic expectations
One of the biggest blunders that most newbies make when venturing into forex trading is setting expectations that are way above their reach. It is okay to dream big, however, you need to be realistic and know that you are not going to get rich overnight. Just like any other form of trading, binary options trading requires patience, consistency, and good strategies in order to succeed.
All this does not come overnight. It takes time to master the art of trading. If you go with the notion of getting rich quickly, then you will be totally disappointed because things will not turn out as you had expected. Just because you have seen your friend making a kill out of binary options trading does not mean that the exact same thing will happen to you.
To avoid being disappointed, then you need to set realistic expectations. Know that as a newbie, your chances of winning are far much less than losing. However, as time goes by you will learn new tricks and strategies that will help you make good money. Set realistic expectations and be patient with yourself.
2. Choose your broker wisely
This is a very important factor that most newbies overlooking. The broker that you choose will determine your overall success in binary options trading. Don’t fall for cheap adverts that you see online. Instead, take our time and conduct extensive research before you make your final decision.
If you have a friend who is already trading on binary options and he is successful, then you can ask that particular person to recommend to you to a reputable broker. The influx of binary options traders has also led to mushrooming of binary options brokers and they all claim to offer the best trading platforms and payoff ratios.
However, the truth is that not all brokers genuinely care about their traders. Some brokers only want to make huge profits at the expanse of traders. You should, therefore, be very careful when choosing a broker. Ask for referrals, read reviews from reputable review websites as well as check with the local regulator to know if the broker that you are planning to choose is reputable and reliable.
3. Remember that learning is an endless process
Leaning binary option trading skills is a continuous process. Binary options are one of the fastest changing markets and require you to constantly learn new tricks in order to stay ahead of the game. If you are a newbie, then you need to know that there is no single point in time that you will sit down and say that you have actually mastered all the tricks used in binary options trading.
If you want to pursue binary options trading professionally, then you need to know that learning binary options is a lifelong process. To catch up with other experienced traders, you will need to dedicate at least 3 months and pure learning to know all the tricks involved in binary options. You also need to update your strategies from time to time because the binary options market keeps evolving.
4. Start small then grow big
If you are a novice trader, you should not trade with huge amounts of money at first. If you do so, then you will get disappointed. Start small then grow big. There are so many mistakes that you will make before you master the art of trading. You should only commit money that you are willing to lose.
Statistics show that novice traders lose 7 out of 10 trades. This means that your chances of winning your traders are very slim. As a result, you should only commit a small amount then as you start making consistent gains, then you can increase the amount to something more reasonable. Conduct a cost-benefit analysis before you increase your trading the amount.
5. Develop your own trading strategy
Any experienced forex trader will tell you for free that you won’t go far if you don’t have a solid trading strategy. Most people who don’t formulate a trading strategy usually trade based on emotions and in most cases, things always go wrong. To avoid this, then you need to develop a trading strategy and stick by it.
It is very difficult to create your own plan especially if you are still new to binary options trading. However, you can copy trading plans of other successful traders. You can also research online and pick some useful tips that will help boost your success when trading.
Don’t trade based on emotions or ego. If you do so, then your career in binary options trading will be short-lived. If you want to get long term success, then you must create a solid trading plan on how you will approach this market and stick by it. If you realize that your current strategies are not working, then don’t shy away from making necessary changes to the plan.