Spread betting and binary options trading are very similar in concept. Both involve making predictions on price movements. Both also involve trading financial instruments based upon the price movements of their underlying assets. And neither type of trading requires you to actually own the asset on which a given trade is based.
There is a fascinating phenomenon in the field of human psychology known as “loss aversion.” Loss aversion is in part exactly what it sounds like. It is the tendency which we all have to avoid loss—but it is a little more complex than that. When we experience loss aversion, we are willing to trade a chance at substantial gains for a chance to simply avoid a loss.
You have just signed up for a binary options trading account and now you are ready to learn. Your broker offers an education section, but when you check it out, all you find are a couple of videos which basically are just another sell on the trading platform. You call up your account manager to ask about one-on-one training, but either it is not offered or the “expert” trader you are assigned seems to be anything but proficient.
How the Dunning-Kruger Effect Can Disrupt Your Trading
Recently I wrote an article discussing cognitive biases. These are shortcuts we take in our thinking, usually on an unconscious level. Because cognitive biases ignore or distort the basic rules of logic, they tend to distort good judgment as well. This can cause problems if you are a binary options trader.
How do you feel when you press “High” or “Low” on your trading platform? Do you feel secure in your assessment of what the market is doing? Or do your hands shake, uncertainty stalling you every step of the way?
You may have noticed that we have a new notice on our front page right now about GOptions introducing 30 second options to their lineup. This is very exciting—most binary options brokers only offer 60 second options. And 60 second options are already very fast—but 30 second options are twice as fast! In fact, this makes GOptions one of the most flexible binary options brokers out there for scalpers.
We talk a lot about getting into the right mindset for trading and making sure you are in a balanced emotional state where you will not go on tilt and make poor decisions. There is no way to ever completely clear your mental slate of the worries, fears, and frustrations you feel, but you never want to sit down to trade when you are totally distraught, either.
As you get into binary options trading and start building up a strong set of skills and techniques, you are actually opening a number of doors to possible career pathways. You can trade for yourself (the default option), but that is not the only option you have. Another alternative is to consider trading for a firm. This is known as proprietary trading, or “prop” trading for short. A lot of people talk about proprietary trading, but not a lot of people know much about it.
Should You Abandon Your Broken System or Try to Fix It?
One of the toughest situations you can face as a binary options trader is one where your trading system or method is not working properly. Maybe you have been using the method successfully for some time now, and only recently it has started to malfunction. It no longer delivers the excellent results you have come to expect. Or perhaps you have no working method, and are simply working very hard to try and generate great results during testing so that you can go live. But no matter what you do, the method simply will not perform as you need it to. In either situation, the prime question is this: Do you keep working on the system, or do you abandon it and move on?
How Are Your Moods Impacting Your Trading Performance?
You have just selected “up” on a High/Low 60 Second binary options trade. Over the next minute, you watch with bated breath as the price rises and falls. Will you lose or will you win? Only time will tell.