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5 Common Mistakes When Trading 60 Second Options

5 Common Mistakes When Trading 60 Second Options

Avoid these 5 mistakes before you end up digging into your emergency fund.

Trading 60-second binary options provides you with a thrilling way to make money fast—or blow your account within minutes.  (Find out if you are ready) The odds of success are stacked against you with trading, make no mistake.  Winning or losing is not really a 50/50, not when your win payouts are around 75% and your losses only return 10% of your money.  You have to be profitable more than 50% of the time to be profitable in binary options trading, which means you have to win more than half the time in order to keep winning over the long term.  And with 60-second trading, if you are making common mistakes, there is not going to be a long term.  You could find yourself out of the game before you even get started.

Here are 5 common mistakes to avoid.

  1. Trading without a system.

Trading without a trading method is like going out into the middle of a firefight without a bullet proof vest or a gun.  It is also a bit like blindfolding yourself and diving out into the middle of rush hour traffic on the highway.  You wouldn’t likely do either of those things, unless you are suicidal, so why would you ever enter the market without a plan for success?  Your success, and your financial survival, depend on your preparedness.  If you trade 60-second options without a plan, you will wash out of the market sooner or later, and with such fast options, it is bound to be sooner.

What does a system do for you?  It helps you to recognize patterns in the market and to use those patterns to your advantage.  If you fail to do so, you are entirely at the mercy of chaos, and Lady Luck is neither forgiving nor patient, especially when trades are blazing by you minute by minute.

  1. Risking arbitrary amounts of money.

Do you risk 5% on one trade and 10% on another?  When a really stellar trades comes along, do you risk a larger chunk of your account, maybe 25% or 50%?  Trading like this may sound strategic, but it is actually a surefire way to go broke.  It adds randomness to your decision-making process, when your overall goal is to reduce that randomness.  It also implies you are taking trades which are less than stellar, whereas you should only ever take the very best trades, and you should always wager a small percentage like 5%.  Learn more about money management here.

  1. Trading emotionally.

There is no way to completely and forever subtract emotions from your trading, but you can at least try not to trade emotionally.  There are a lot of different mistakes which fall under “trading emotionally.”  Chasing your losses to try to make up for them is one of those behaviors.  Another is to believe that you are on a winning streak and that you are invulnerable, which can lead you into making trades you would normally avoid, believing your luck will cause you to profit.  So both negative and positive emotions can ultimately have a negative impact on your trading.  Many new traders think only despair can harm your trading, but in reality, pride can be your undoing just as quickly.

These types of trading behaviors are more challenging to combat when you are trading 60-second options than other types of trades, because you not only feel like you can “get revenge” on the market, but like you can get instant revenge.  As human beings, we are terribly tempted by the idea of “instant” anything, particularly instant redemption or instant success.  Just remember that instant failure is the far more likely outcome.

Another form of emotional trading is trading on instinct.  How often do you look at the market and a little voice in your head says something like, “Buy oil; oil’s going up; do it now!”  The voice may even have some kind of logical argument to offer you based on geopolitics and events that are going on in the world.  But unless you are truly an economics expert, these little justifications are nothing more than excuses for you to indulge your instincts and your conceit.  This is not to say that intuition does not play a part in trading, but it should never form the entire basis for your decisions.

  1. Trading without testing.

This may actually be the most common beginner’s mistake there is.  Even traders who have gone to the trouble of getting a trading method may test it on a single trade to be sure they understand how it works, and then simply start using it live with real money.  This is extremely foolhardy, even if the trading method has a string of great results for other traders and you have seen those results publicly posted.  It does not mean you will achieve the same results.

Why test your trades?  Firstly, it shows you how the system works not on one type of trade, but on many, and in different market contexts.  It is the only way that you can truly learn to recognize good and bad trade setups.  It also demonstrates whether the system will work given your personal constraints as far as scheduling and investment percentage.  And it helps you to be sure the system will work for you.  Not every trading system is ideal for every trader.  Different approaches work for different traders.

Backtesting on historical trades is important, and so is demo testing with virtual money on a free account.  Demo testing is particularly key when it comes to 60-second options, because your trades unfold so quickly. (Find a Binary Options Broker Offering Demo Trading Accounts here) New traders often panic during their initial live trades because they do not feel comfortable with trading yet.  Can you imagine how much more you would panic during the course of a 60-second trade if you didn’t know what you were doing than you would during a one-hour trade?  All it takes is a brief lapse of judgment.  The time expires and you lose your trade.  Demo testing will help you to familiarize yourself with trading and get comfortable so you can trade with a level head when you put real money on the line.

  1. Forgetting this is a business of risk.

A lot of binary options advertisements seek to induce traders into forgetting how much risk is involved in binary options trading.  You will actually see advertisements which promise things like “100% return on your investments,” or that tell you that you can “Win 100% of the time.”  This kind of language should send you running for the hills, because it is absolutely 100% impossible to win 100% of the time.  All you need to do is ask yourself why someone who can win 100% of the time would even bother selling a system or a product.  That person should be the richest person on earth.

You can lose at binary options trading.  Moreover, you need to face the fact that most traders will lose in the short run or the long run (most of them in the short run, especially among 60-second traders).  You do not have to be one of them though, if you trade smart.

Photo Credits: Emergency