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How to overcome fear and greed when you trade binary options?

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Getting emotional while trading - good or bad?

Every financial speculation or investment is accompanied by a certain amount of risk, regardless of the experience and knowledge of the trader who is getting involved in it. The fear of losing one’s investment often leads to his indecisiveness or to a rash kind of trading based more on emotion rather than on analytical and logical thinking.

Introduction

While the greed for more profits often drives a trader to the limits of his luck and in the end he ends up with nothing in his account. Controlling these two emotions is the key to success.

Overcoming fear and greed at all is something impossible, but one should try to keep his emotions down to the healthy minimum in order to become a successful trader. However, these feelings are not bad for the trader in every aspect; for example when the fear or losing too much in a single trade is the reason for a controlled risk and the investment of rational amounts of the account. And to be honest, Greed was the moving force for most people to become traders, though some call it the pursuit of a better life.

Calculating the risk

Binary Trading is like trying to convince a beautiful girl in a bar to give you her telephone number. One either succeeds or he doesn’t. Of course, with the girl he risks only a few minutes of his time and a little effort to be as nice and polite as possible, but there is still a kind of fear that he could be rejected and it is often the reason why so many girls remain only a dream that never came true.

So the conclusion from this comparison is that with every effort that one makes there’s a chance of losing something and a chance of winning and it is good to know how much of the time, effort or capital, which is the case with binaries, is one ready to loose and is the prize worth the risk.

Controlling the risk - Don’t put all your eggs in one basket

It is a good part of the strategy to invest small amounts into many trades, thus dispersing the risk, which also increases the amount of different opportunities for the trader. Trying to stick to a certain share of about 1 to 5 percent of the capital in the account is giving the confidence that one won’t lose much if he doesn’t finish in the money and even that he could win in the other trades.

And of course, everyone would agree that investing all you have in one trade is ridiculous. They say: “Don’t put all your eggs in one basket” and that also refers to trading. Being involved into many different trades also gives more experience which is more valuable in the long run.

Trying a demo account searching for the right strategy

The demo accounts that some brokers offer are perfect for novice traders in order to find what kind of strategy fits them most. It is very soothing to know that one can practice his skills, without losing real money. Once a trader finds his kind of strategy, it is time to try it for real, again with small amounts. And still, it is comforting to know that with binaries, unlike Forex trading, one could only lose the amount that he had invested in a trade and nothing more.

It is important to have some money saved only for trading. People who invest in binary options their budget saved for living expenses, are more nervous than these who have a “trading fund”. They trade with the fear that if they lose, they would have to do without some of their indulgences or even might have some rough times. This can only evoke negative emotions which are not good for a trader and for anybody in general.

Stick to the chosen strategy

After a trader had chosen a strategy, he should stick to it and restrain from doing any general changes in it. He should take his time before making each trade, analyzing and having in mind the current situation of the market. After a bad move, he should think of the logical explanation why his strategy didn’t work and make his own conclusions for the future.

Emotions and superstition have no place in these processes. Rational thinking is the only way to begin winning. And when a trader starts gaining profits he should bear in his mind the idea that the market would eventually change and he should be ready to predict it using only facts - facts and no guessing.

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.

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