Binary options trading may look simpler and the payouts comparatively easier to learn than in other markets, but the truth is that if the binary options trading guidelines are not followed, the trader will run into severe problems and lose money faster than the speed of sound.
So what are the binary options trading guidelines that every intending participant in the binary options market should follow?
The fact that there are many financial assets to trade and many trade types does not mean that the trader should trade everything tradable. It is better to master one or two trade types and just a few financial assets than to be a Jack of All Assets and master of none.
Risk management is something that should be close to a trader’s heart when trading any financial market and binary options is no exception. Some traders try to aim for returns of up to 800% in a single day by opening multiple positions, hoping to strike it big with all of them. This is a wrong approach. Rather, open positions in such a way that your risk exposure is never more than 5% of your account size. For instance, if you use a chart pattern for a trade which you are sure will be a winner, place two trades around it. If you use a rising wedge to predict that an asset will head to the downside, you can use a FALL or DOWN trade as well as a NO TOUCH trade with an upside target. This way, the trader can kill two birds with a single stone.
One key binary options trading guideline that many traders frequently disobey is to have a trading plan. A trader who is trading to make money to spend for the weekend and someone saving for a business he intends to start two years down the road will not have the same trading style. Your plan will determine your goal, and how you want to get to your goal. If you are a trader with a long term goal, it is better to reduce risk and compound your profits over time, which will require discipline.
Stick to the optimal trading times. It is bad practice to stay up late at night when you should be sleeping and giving your body the best kind of weapon to recuperate for the rigors of the next day. Not only will your brain be tired at that time of the day, you rob your body of the ability to function properly the next day. So all the next day’s trades will stand the chance of being jeopardized as well.
In the same vein, some assets are best traded at certain times of the day. A stock index asset can only be traded when the parent market is open, and currency assets will only have maximum volatility during the overlapping time zones. These are the best times to trade.
If traders follow these guidelines, they might make bankable profits from this adventure.