5 Mistakes that All Binary Options Traders Do

During these long five years that I trade binary options, I had a lot of conversations with both professional traders and the beginners. Among the traders who had just started their binary options experience were those who succeeded and those who couldn’t crack the secret yet.

So I got really interested in finding out what were the major factors that allowed the first category of traders to succeed and the second category to remain wondering – how people make money on Binary options

To my surprise, I realized that all the countless reasons that I heard from both sides can be categorized in 5 main topics. And today I will share with you my findings and advice of how to avoid the main binary options trading mistakes.

Money Management / Risk Control

money management in binary optionsBelieve me, having great trading strategy is not enough, as no strategy and no technical analysis is going to give you 100% success. This is just the way financial markets work. In order to have consistent earnings and to really make money on binary options, first and foremost, you need to have a money management strategy. Bear with me for 1 more minute and you will learn one very simple rule, which will allow you to always have control over your risks and to be on top of the money management.

The main principle is not to risk in one trade more than 5% of your deposit amount. Let’s say you have $1,000 on your trading balance. When you trade, make sure that you invest in each binary option not more than $50 (5% of your total account amount).

This approach is not a rule of thumb, but a scientific approach, called Kelly Criterion. It was developed by John Kelly in 1956 and since then is widely used by traders all over the world.

Not Trading, but Gambling

Is trading a gambling?It is no secret that binary options are in some aspect related to the gambling world. Sometimes they are even called “Financial Betting” as after all you only need to predict the direction of the asset price – Up or Down.

Indeed sounds pretty much like Roulette… And you will be surprised to know that prevailing majority of people starting their binary options experience think so. These people don’t bother to find a good performing trading strategy or to learn the market behavior, they just bet.

As you may guess, this approach is wrong. You will not make a lot of money on binary options just by following your gut feeling. To make consistent profits you need to find a trading strategy that you feel comfortable with.

There is one big difference between gambling and trading. When you gamble, you face high risks vs. low chances to win, whereas when you trade, you accept weighted risks having much higher chances to win.

Those who are not able to distinguish between trading and gambling often would go wild on forums saying that “binary options is a scam”, “you will never make money on binary options”, etc. They tend to blame everyone around them for their loss, but not themselves…

Desire to Recoup

Don't try to recoupLet’s continue the gambling topic =) Many of us have ego and that’s OK. But you have to remember, that as you enter the world of trading (especially binary options), you need to say good bye to your ego. There is no such concept as “to recoup” in trading. By the way, in my humble opinion, there should be no such concept in gambling as well, but let’s leave it for the separate conversation.

Remember: if you entered some deals and they were not successful, one after another bringing you losses, you MUST stop trading that day. There might be many reasons for your failure and not always these reasons are connected to you. For example there might be some important financial news released on the market.

News always affects the market and in this case if you are working with graphs and technical analysis, you will not be able to make the correct prognosis as the news is stronger than the market patterns. Once again, my advice in situation like that – just stop trading that day and come back the following day.

Robots and Signals for Binary Options

Robots and signals for binary optionsFollowing robots and people selling signals for binary options is the shortest way to lose your money. Remember, you and only you will treat your investments the best. No other person will do it better.

Robots cannot predict the market as market is a living creature. If robots could really predict the market, we all would have been millionaires long time ago.

With regards to people who sell signals (for example invite you to a chat room where they share their predictions for money), this is pure scam. I myself have tried giving out signals and I can tell you that it is a very time consuming procedure.

Basically you cannot both trade on your own account and be in chat with other people giving them a signal. And now I will ask you: “Why a person who can make thousands of $$$ per day on trading would stop doing that and instead sell signals that might bring a couple of hundreds?” I hope you got me 😉

Wrong Choice of Binary Options Broker

Unfortunately, the more the product is popular, the more fakes there are on the market. Same thing with binary options. This financial product is extremely hot now all over the world and naturally it attracts scammers.

Recently there was a wave of one-day brokers, who open their business just to collect money from people and then they disappear from the market with the money. If you want to know that your investments are safe you need to choose a reliable partner – a binary options broker who is licensed and has a proven track record of paying out the earnings to its traders.

For your convenience I have created a table, in which you can see binary options brokers that are safe and reliable (all are certified and are checked by me personally).

4 Comments + Add Comment

  • Sir please I will like to know if you have been making money from binary option trading, and if so, I will like you to mentor me in binary option trading because I just love binary option

  • Wow , it’s amazing… I did all these mistakes =(((( I wish I had seen your blog before I started trading binary options. By the way, thanks for brokers reviews, very helpful!

  • Also not starting trading on a demo account, that is also a huge mistake made by many traders. , anyway great post man 🙂

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