Many traders venture into binary options trading without being fully aware of all the pitfalls that might happen along the way.
Over-trading is one such issue which happens quite often and traders are not even aware they are doing anything wrong.
Because of that, we have decided to present South African traders who are looking to start trading binary options with a simple account of how and why over-trading happens and what they can do to avoid it.
One of the first steps to take, not just as a response to question how to avoid over-trading in binary options but have to have a successful and fun trading experience is to set a money management plan.
Money management which is a broad concept, has several key elements and those are:
- Planning in general
- Set budget
This might seem slightly alarming to a novice trader but the simple basic principle behind it points to one and one thing only – balanced trading.
While it does take some time and skill to achieve that, one of the obstacles that might be standing in the way is the need to place more trades than is reasonable or smart.
That is why South Africans who want to explore the earning potential of binary trading have to learn how to avoid over-trading in binary options which is one of the most harmful behavioral patterns.
Common Reasons Why Over-Trading Happens
Short and simple answer would be – because we are humans with all the weakness that brings along.
Nobody is immune to making mistakes and failing to control emotions.
However, those who wish to do to binary options trading need to tackle this issue since control and balance are a prerequisite for reason-driven decisions.
We shall present South African traders several reasons and situation when over-trading usually happens and we’ll provide advice on how to avoid this harmful behavior.
Feelings of Frustration and Disappointment
All who go into binary options trading are motivated by the possibility of turning it into a profitable venture, and that is perfectly fine.
However, what happens often with inexperienced traders is that the need to be successful clouds judgement.
Bad trading decisions end in lost funds and that brings both frustration and disappointment which leads to more bad decisions. And then traders get stuck in a vicious circle.
Nobody likes to experience loss but that is a fact of life, no matter how experienced a trader is. Even traders who have been trading for years don’t win all the time.
By being aware that losses happen is a first step to avoid over-trading in binary options because then trades will not fall into frustration and despair.
Because the most basic human instinct is to somehow counter the loss which they suffered.
In binary options that means that traders place more trades hoping to cover the loss. Traders which are placed in a hurry and without being carefully considered usually fall flat.
This is the fertile ground for even more over-trading.
Feelings of Greed
There is no way around stating this rather unpleasant fact about human beings – greed. And greed in trading leads to over-trading and eventually, to financial loss.
South African traders need to keep that in mind and avoid this rather common scenario which usually goes something like this:
Traders start trading binary options and they keep making great trades which bring in fine profit. That triggers a pattern of behavior which sees traders placing more and more trades in hopes to continue this lucky streak.
However, what they forget is that they started by sticking to a well-formed plan which eventually lead to success. Very few are successful by pure luck. That is the basis of gambling, not trading binary options.
Bottom line is, traders have to know when to stop and control the feeling of greed which are pushing them to carry out more unscheduled trades.
Another easy to understand mistake traders often make is to fall for seemingly fantastic opportunities which promise a profitable trade. Sometimes that just might be so, but it is still far more prudent to follow the plan made at the beginning.
South African traders who are serious about binary trading and look to do it in a long-run have came up with a plan which meant they took time to plan, learn, analyze so simply abandoning that pan and making traders which were not part of that plan is probably not such a good idea.
All traders sometimes follow their gut-feeling and carry out traders that seemed like fantastic opportunities and were precisely that – great opportunities. Yet, the operating word here is – sometimes.
Therefore, experiencing such instances is perfectly fine but keeping to the plan is the balanced and controlled trading behavior which will bring more profit in the long run.
How To Avoid Over-Trading in Binary Options
Good news is that there are ways to avoid the harmful over-trading behavior.
With a little bit of training and time, South African traders can learn how to control the impulse to over-trade and turn binary options into a profitable venture.
Make a Plan and Follow Through
Putting together a trading plan is the essence of successful trading and by investing time to do it is more likely to produce the desired result – profit.
Yes, South African traders interested in binary options will have to put in time to analyze and monitor trading circumstances on the market. However, that approach is more likely to be successful. Once traders have a solid plan it is logical to follow it and not sip into over-trading pattern.
Decide on a trading budget, select assets, trading options and expiry times and then just follow through with the plan made.
Keep Emotions Under Control
Emotions are integral part of human beings but in financial dealing they might prove to be the enemy rather than an ally.
South Africans who wish to trade binary options do so because they want to make money hence trading becomes a business.
Having fun while trading is great and is an added bonus, but in order to be profitable over-emotional behavior is not welcome.
Short Term and Long Term Trading
At the very start, South African traders might find trading short term option more exciting than long term options.
That trading style might even be profitable but trading long term option is more likely to be a profitable long-term solution.
Additionally, when traders favor long term trading options over-trading is less likely to happen.
By trading long term options it is easier to predict what might happen on the market than when trading 60 second options which might be more fun but it is also more difficult to make a correct prediction.