Not to put a dampener on things, but the fact is that most binary options traders never make vast fortunes. In fact, a surprising proportion of traders find themselves floundering and failing rather more quickly than they would have expected.
Well, for hundreds of reasons to their particular case. But while all of this may come across as a dose of doom and gloom, it’s worth bearing in mind the value of learning from the mistakes of others. This way, you don’t have to make the same mistakes yourself.
So with this in mind, what follows is a rundown of ten of the most common reasons why far too many binary options traders fall at the first, second or third hurdle:
Overlooking the Importance of Knowledge
Right off the bat, there’s absolutely nothing to stop you approaching binary options as a fun form of gambling. After all, in most instances you have a 50/50 chance of coming out in-the-money. Unfortunately, anyone with a modicum of intelligence will tell you that these are not the kinds of odds you should be willing to accept. In the world of binary options, the odds of success with each and every trade increase in direct accordance with your knowledge of both the asset and market conditions at the time. It might be easier to simply wing it, but you’ll only have yourself to blame when things go wrong.
Allowing Emotion to Influence Your Decisions
One of the most important skills required to succeed in binary options trading is that of remaining cool, calm and collected at all times. It means being able to simply accept the fact that you’ve just lost 75% of your entire available finances on a trade that should have been a dead-cert. More importantly, it means not falling into the trap of blowing the remaining 25% on a ridiculous option, simply having allowed yourself to be clouded by emotions. This is not only difficult, but also the kind of thing that depends more on your nature than your willingness to learn.
Ignoring Broker Warnings
We aren’t going to name any names right now, but you only need to hammer a few choice terms into Google to find yourself with a list of brokers you probably should stay away from. Not only this, but there are plenty of sites like Trustpilot that exist only for the purpose of publishing customer reviews. The occasional disgruntled trader is one thing, but it’s something else entirely to come across brokers that have predominantly negative reviews. Or worse still, reviews where patterns emerge of fraudulent activities the likes of which have left customers unable to get anywhere near their own money. If the overwhelming majority of evidence seems to suggest that any given broker isn’t worth dealing with, why take the risk? Nevertheless, some do…and far too many at that.
No Strategy or Plan
If you’re new to binary options, the idea of coming up with any specific strategy or plan for your trading activities may seem somewhat unnecessary. However, you at least need to have a concrete idea as to how you intend to approach trading in general. How much time will you be dedicating to both trading and research? How much disposable income can you afford to put on the line? What is the maximum loss level you are willing to incur before walking away? Do you intend to reinvest all of your profits across the board, or immediately withdraw them and put them away? The more random your approach is, the more likely you are to struggle. The more you structure and plan your approach from day one, the better.
Chasing Overnight Glory
These days, the fact that there are 60-second and even 30-second options available has a habit of misleading a lot of traders. Technically speaking, 30-second trades mean that if you start right now with $10, win without fail and keep re-investing all your profits in consecutive 30-second trades, you could end the day extremely rich. Statistically speaking however, this is about one point short of fundamentally impossible. Literally, the odds are astronomical. Which is precisely why it is important not to fall foul of the urge to become an overnight success story. One of the biggest mistakes so many traders make is attempting to rush things, overlooking the fact that binary options are less a sprint and more of a marathon.
All Eggs in One Basket
Another extremely common mistake that can lead to instant failure is that of overstepping the mark in terms of your own confidence. The simple fact of the matter is that while you may be 100% convinced that any given trade will work out in your favour, it is absolutely impossible to eliminate risk entirely. Which in turn means that if you put all of your proverbial eggs in the same basket, you set yourself up for an all or nothing result. This is an extremely common mistake among newcomers, who assume that just because they have say $200 in their account in total, they can afford to take the risk of placing it all on one trade. Which they can, but stand a very good chance of losing everything and walking away with nothing. Any experienced trader will tell you to never under any circumstances focus all your resources on a single gamble.
False Sense of Security
Falling into a false sense of security can also be extremely harmful and is a common mistake among newcomers. Specifically, this occurs when a trader falls into the trap of assuming that their chosen market is constant and does not change constantly. In reality of course, the only thing that is constant is the change. There are so many micro and macro factors to take into account when it comes to binary options trading that to make any kinds of presumptions or assumptions is to set yourself up for disaster. Positions should only ever be entered into on the back of research, knowledge and forethought – never blind presumptions.
Another example of a relatively common problem among many traders is that of not knowing how to draw the line between commitment and stubbornness. Commitment to specific markets or assets is essential for anyone looking to gain as much knowledge as possible, in order to enter into educated and thoughtful positions. However, if it is becoming glaringly obvious that your chosen markets and current trading style in general are bringing you nothing but misery, sticking it out just for the sake of being stubborn isn’t necessarily a good idea. The same also applies to those who haven’t quite mastered the art of quitting while behind and instead insist on chasing losses in an attempt to at least break even. When it comes to trading at all levels, stubbornness has the potential to be your worst enemy and can be a very difficult habit to break.
Opening Too Many Accounts
The thing is, if you find yourself an absolutely outstanding broker that covers all bases, there’s really no reason why you should need to open more than one account in total. Nevertheless, so many traders make the mistake of opening countless accounts with multiple brokers, which in many instances inherently leads to complete and utter disorder and disarray. Quite simply, if you find a broker that appears to be offering a better deal than your current service provider, it makes far more sense to migrate entirely than to keep both accounts running side-by-side. You may be able to handle a handful of accounts running simultaneously when you reach an advanced level, but for those still finding their feet, it can have disastrous consequences.
Restrictive Terms and Conditions
Last but not least, read through any list of complaints voiced by binary options traders against brokers and it’s guaranteed that a huge chunk of them will concern being barred access to funds and profits. Which in the vast majority of instances is the result of accepting promotional offers or welcome bonuses that attach ridiculously excessive trading volume requirements. But what’s even more distressing about these instances is while trader ‘A’ may have pulled in profits of $50,000 with a $2,000 bonus, the broker may still reserve the right to refuse withdrawals. Unless they meet the terms and conditions they signed up to – some stipulating 50X trading requirements – the trader does not have a leg to stand on. All this profit goes straight in the pocket of the broker and the trader is left well and truly out of pocket. Terms and conditions must by law be published in full; use them and refuse to sign up to anything that prioritises the broker over you.