Trading binary options is exciting, and for a brand new trader, the possibilities may seem endless. You probably are attracted to binary options in part because of advertisements which say things like this:
- “Make 500% in 60 seconds!”
- “Turn $500 into $500,000 in two weeks!”
- “75% when you win, 10% when you lose!’
- “Quit your day job by trading binary options!”
These slogans are very attractive, particularly to someone who is trying to become financially independent enough to quit a tedious or backbreaking day job and embark on a bright new future. Binary options trading is open to traders who have even the smallest accounts, starting out with just a couple hundred dollars. If you’re one of those traders, getting ready to put down $250 to open your first binary options account, you are probably thinking,
“I could make 500% in 60 seconds! And I could win a bunch of those trades every hour. So maybe I really could turn my $250 into hundreds of thousands of dollars in a few weeks or months! I could be a millionaire inside of a year. I can quit my day job right now!”
This is exactly the way that advertisers want you to think, because it is the kind of attitude taken by casual gamblers who, more often than not, lose all their money. That’s profit in the pockets of brokers and affiliates (not to mention, other traders, who do know what they’re doing).
Here are some myths about binary options trading it is best to dispel now, before you lose all your money on unrealistic expectations. Try not to get discouraged reading this. By adjusting your expectations now, you make it far more likely you will actually become a profitable binary options trader—and maybe eventually quit that day job.
1.Almost all traders will lose money and wash out of the market.
This is a tough fact to face, but it’s a real one nonetheless. No one seems to have precise statistics on this, and it probably varies a bit from market to market, but generally speaking, retail traders fail. The reasons for this include entering the market with unrealistic expectations, failing to test, improper money management, lack of self-discipline, and poor follow-through, among other things.
Very few people who become interested in trading are market experts when they form that interest. You have to become an expert in your trading method before you can become profitable, and most traders are unwilling to make the commitment to learn. If you are, you will set yourself ahead of the rest. Around 90% of traders lose money and wash out of the market. You don’t have to be one of them. Click here to develop your own discipline with trading.
2.You will make mistakes in the beginning.
Even if you do a lot of testing, it is inevitable you will make more errors starting out than you will later on, if you last in the market. You can reduce those errors and the damage they inflict by doing plenty of testing in the beginning. Try demo trading for a while before you trade live. A couple of brokers offer unlimited demo testing. And before you even do that, you should be backtesting your system on historical data using old charts. You can read more about how to do that right here. Only after you find something that works and provides statistical proof of its effectiveness should you then proceed to testing in real time.
Demo testing is far less costly than trading with real money. How much less costly? Completely free! You do not have to spend one dime on your demo account, and no matter how many mistakes you make, you do not have to pay for them. You make think that “paper trading” is a waste of time, but once you start making some of those mistakes in demo, you will probably be really grateful it did not happen with real money on the line.
3.Everybody loses trades. You will lose trades too.
There are various ways to approach this problem. Some traders actually expect to lose most of their trades, and set up systems that allow them to lose only incremental amounts of money (usually through early exits), but also to ride out massive wins (by rolling over or doubling up for example), so that in the end, their wins total up to more money than their losses. Others make systems which may involve smaller wins and larger losses, but the vast majority of their trades will be winning trades, allowing them to profit consistently.
What you will never see is a 100% perfect system which makes it impossible to lose money. There is no “holy grail” of trading that will allow you to build up ongoing profits forever without any losses. All systems have their flaws. You just need to make sure that your system is profitable in spite of its flaws, and that you have accounted for those flaws in your money management plans and your entry and exit rules. You can never escape losses completely, but you can plan to mitigate the damage and control the outcome to the best of your ability.
4.You cannot quit your day job tomorrow.
If you are planning to tell your boss you quit so that you can get on with the adventure of binary options trading, you need to stop, take a breath, and think about that decision for a moment. Most people want to quit their day jobs sooner or later, but here is what is going to happen to you if you quit your day job now (assuming you are not sitting on a massive pile of cash).
You will start trading tomorrow, and you will be excited that you have the whole day in which to trade. You may be thinking you have more opportunities. By the end of the month, maybe you are not even doing that badly. Perhaps you have made a couple thousand dollars. That is great—you are growing your account. Or … you were, until you realized that rent is due, as is your electric bill, and you need to buy groceries for next week, and you need to gas up your car and so on. Before you know it, you have spent your entire month’s profits on keeping afloat, because you no longer have another source of income. You start over at the beginning of the next month and do it all over again.
Then you realize you are stuck. You cannot grow your account because you have to keep withdrawing from it to pay for your bills and finance your basic existence.
How could you have prevented this? Simply by not quitting your day job right away. If you had held onto it, you would have actually been able to grow your account by a couple thousand dollars each month. Would it be a lot of work? Sure, but it would be worth it in the long run, wouldn’t it?
After a few years, you might be able to quit your day job and actually enjoy life as a professional trader. That is really the lesson here. There is always a point where any new trader realizes that binary options trading is going to be a lot harder than it originally appeared, and that you cannot realistically expect to become a millionaire within a year. But you may be able to trade professionally in a few years, and you also might eventually become a millionaire. It all starts with patience and realistic expectations, though. It isn’t the trader who gets lucky and strikes rich in the first week who becomes a millionaire. It is the trader willing to take the long, slow path to victory.
|REVIEW||MIN DEPOSIT||AVG RETURNS||VISIT BROKER|
|$50||160% - 180%||VISIT SITE|
|$250||80% - 90%||VISIT SITE|
Use this as a guide to balancing your trading life with your full time job.
New to binary options trading? Use these references when starting out: