« »

Tuesday, April 2, 2013

What are binary options?

Skilled binary options traders use market indicators and trend analysis
Investing in binary options is a risk endeavor that should be taken seriously

Whatare binary options? Binary options are a new financial product that has met a lot of success with people interested in trading financial markets. But one thing is clear, there are more losers than winners in trading, including binary options traders.

Some advertisements may claim you can earn thousands of dollars per month by trading these instruments. We all know that before getting there, it will take perseverance, effort and some good morale because the road to success is paved with failures. But failures can be beneficial if it you know to learn and improve from them.

Investing in binary options implies that you have the means to do so. In other words, do not invest money you cannot afford to lose. If you have difficulties making ends meet, trading binary options is perhaps not the best choice. In this case it is better to consider less risky investments such as traditional CDs or bonds. Binary options trading is further illustrated in the presentation below.

Before jumping in to binary options trading, it is also necessary to endorse some golden rules of online trading that apply not just to binary options but also to other types of investment. If there is one rule that you must master, it is the one that says that the objective of trading is not to win, but to avoid losing. This rule epitomizes what online trading is: an inherently risky investment, which seeks the maximum profit by minimizing losses.

Often before winning, we must learn to lose. Losing will highlight your mistakes, your shortcomings and if you take a step back, you will be able to improve yourself by correctly identifying your weaknesses. Usually, they are three types of errors:you are not familiar enough with technical analysis which prevents you from trading binary options effectively, you do not have a trading plan or you do not follow it and you are unable to control your emotions.

In many cases, it is not so much the lack of mastery of technical indicators such as breakout channels, moving averages or RSI which explains losses with binary options, but the lack of a trading plan. Novice traders in binary options make the mistake of not taking the time to make their trading plan, to improve it gradually as they go and especially to follow it without deviation when they are in the market. In fact, losses can accumulate and new traders will often end up joining the ranks of the binary options losers and they may abandon trading digital options too early.

Take the time to make a trading plan including all the necessary aspects (software tools to find support and resistance, integration of economic news, acceptable losses, expected gains, etc.). It is the key to success in this activity.

Then if you manage to control your emotions well which is not the easiest as a trader, you will be able to not deviate from your plan as long as your positions are not closed. Changing your plan along the way is a big mistake because it is often under the influence of emotion. In order to improve your trading plan, take a step back, be out of the market and carefully analyze your mistakes. By doing so, you can be one of the winners in the binary options market.

 Image credit: Cocochico; CC BY-SA 3.0