Trading is Emotional – Especially When Trading Options for a Living
Make no mistake: regardless of your personality type, once you start trading options for income your emotions will run wild! You’ll feel all of these emotions at times and we encourage you to refer back to this post for help whenever you can feel yourself drowning in any one of these emotional states.
The most successful binary options trader is the one who can handle their emotions, to remain on a relatively even keel throughout the inevitable ups and downs. It is also vital to have the belief that you will make a lot of money in the long run through trading options for a living. Always focus on the wins and not the losses, and imagine yourself winning every time.
Fear and Anxiety
Let’s start with the big one! These are definitely very common emotions and fear is probably the most crippling one. The reason most people don’t get spectacular results in life comes down to this little four-letter word. Fear holds people back from doing what they really want to do and it can appear in many different formats. Almost every binary options trader will have a fear of failure (probably the most common of all), fear of losing, fear of looking stupid or being embarrassed, and even fear of success!
Don’t beat yourself up if you’re in this state, everyone feels fearful and anxious at times and these emotions do have a purpose. Of course it’s what you do with the fear that will make all the difference. Overcoming fear is essential just to start trading with real money (after figuring out the basics with your free demo account), let alone when you start trading options for a living. It’s really just a decision. Remember why you decided to look into binary options trading, what it is about your life that you’re looking to change, and where you’ll be if you let fear and anxiety stop you from moving forwards.
Make sure you are not risking more than 5% of your funds on any one trade, and even less if possible is good when you’re starting out. That way even if you do lose a few times over you’ll still have plenty of funds left to continue trading options for income, and as your skills and experience increase you can recoup your losses and win back a whole lot more. Some binary options brokers such as OneTwoTrade even give you some of your money back even if you lose (generally around 10% of your premium) so it’s really not that bad.
One of the big benefits a binary options trader has over a standard options trader is that greed is not as much of a problem due to the option types available. Often as a binary options trader you are trading your premium on a fixed timeline (with 60 second trading, 5 minute, 15 minute etc trades), and the trade either wins or loses. For instance, if you want the asset to increase in value and so you place a call option, it doesn’t matter how much it increases, you will win regardless of the increase in price.
Greed comes into it as you become more experienced and want to place a higher percentage of your trading account on a single trade for a potentially bigger win. This of course exposes you to a bigger loss if the trade doesn’t go your way, and creates more stress – particularly if you are trading options for a living.
You can beat greed with discipline. Just stick firmly to your risk management rules and don’t get over-confident as that can often be to your detriment, leading to a whole heap of other negative emotions.
Desperation and Panic
You may not always find an appropriate signal to place a trade. Don’t get desperate to trade something and lower your entry standards. If there is nothing to trade that day don’t panic – just take the day off! There’s no law that says you have to place a trade every day – remember you are trading options for income, not just for something to do. It’s better to make a deliberate decision to do nothing than it is to lose just for the sake of doing something. Be patient in order to ensure your wins will override your losses, and you will end up on top.
Thrill and Excitement
Whilst these are of course considered positive emotions, the successful binary options trader will keep them under control. It’s great to celebrate your wins and they are exciting, particularly when you start out your binary options trading career. However excessive highs can lead to excessive lows and an emotional roller coaster that won’t help you overall.
Be happy when you win on a trade, but don’t get too carried away. Bear in mind it’s just a part of the journey, there will be lots of wins in future and each one is bringing you a step closer to the long term results you wish to achieve.
You may naturally be angry with yourself if you lose on a trade, and it’s particularly frustrating if you’ve made a mistake using the platform or in some other way that could have been avoided.
Mistakes are often blessings in disguise. Providing you learn from them and don’t repeat the same ones, they offer a great learning opportunity that you are most likely to remember in future. Embrace them as such.
Most of the time if you lose on a trade it will be through no fault of your own, merely the fact that no-one can ever accurately predict the markets 100% of the time. Getting angry with yourself may be a natural response but it will not reverse the loss or help you in any productive way. If you’re trading options for a living, then just as with any other type of business you will have expenses to pay. Losing on some trades is just the format those expenses take for a binary options trader.
Although you may know all this mentally, anger can still be a natural reaction to a loss of money. Realise this is normal, and don’t allow it to hold you back or dominate your emotions. You need to be emotionally strong and in control of your mindset to be trading options for income successfully in the long term.
In Summary – Managing Your Emotions as a Binary Options Trader
Without doubt there are many emotions you’ll feel as you progress through your career as a binary options trader. Stay positive and focus on what you are trying to achieve long term: remember that you are trading options for income. Your losses are just an inevitable part of the journey. The sooner you can accept them, pick yourself up and continue on your way, the more successful you’ll be as a binary options trader.
If you can find a ‘binary options buddy’ to share your stories with and who understands what you’re going through that can also help. Often you’ll be feeling positive when they are not and vice versa, and you can help each other progress along the path of success.