Tip 1) Coaching and further education
You should comprehensively study economy and exchanges, and follow chart analyses and latest developments. Of course you should not blindly rely in your trading on what an analyst at a bank believes to know about a stock. Even comments made in highly respected news programs such as ARD’s “Börse“ too often amount to not much more than reading tea leaves, no matter how professionally they are presented. That is professional journalism, not professional exchange knowledge. Whoever really understands the exchange will be busy trading, not prognosticating. But you should understand market mechanics. Read up, there are helpful books and articles online, including here on our site!
Tip 2) Know your markets and underlying assets
Markets behave differently, and for good reasons. A stock market, and the resulting index (DAX), tend to move up during sound economic conditions, while two currencies tend to move sideways against each other (even during long periods and over decades). After all the U:S:Dollar wil not fall to zero against the Euro or vice versa, while a share price clearly can fall to zero or continually rise (Microsoft shares once were worth a penny). Industrial commodities move with the business cycle and the development of newfound deposits; gold is the traditional “safe haven” which can also be overvalued, silver is a hybrid between an industrial metal and a store of value. News can influence rates in certain ways, very strongly at times. In this context one should be familiar with important economic indicators; they include the consumer price index and employment figures.
Tip 3) Money management
This concerns the essence of market trading, the handling of money. It is different from risk management even though both areas are very closely related. Risk consists in rate developments that are hard to predict; money management refers to available capital in general which depends on total living conditions and additional revenue. Even though large investors sometimes do, private traders are strongly discouraged to speculate on credit. Furthermore it is recommended to commit per trade no more than 5 percent of the total capital that may be lost in a worst case scenario. These recommendations however range from 0.5 to 10 percent. No one should risk more than 10 percent of their total capital, otherwise losses cannot be recovered.
Tip 4) Emotional equanimity
Stock trading is exciting enough, any inner tension can lead to errors of judgment. The most important principle here is that rates can only be followed, not forced. Trading can be very fast, but rates can also remain constant. Of course for the latter case binary range options can be utilized, but maybe you just have counted on movement by using put, call or touch options. If things develop against your prediction there is nothing to be done but to accept the facts. Exchanges with their many millions of participants worldwide and the enormous amounts being traded represent a force not unlike the weather or the movement of celestial bodies. A single player cannot influence it, just play along.
Tip 5) Pause after trade closure
After incurring gains, as well as losses, you should take a break. Experienced traders with decades long successful track records report that they do not even trade every weekday. Exchange trading tends to create great inner tensions which however are often hard to perceive. For trading is quiet, in iself unemotional, nobody upbraids, no physical effort is required, just hitting a few keys. You can make great gains or lose all. After a loss you may be tempted to want to quickly recover everything, following a win you could become overconfident. Experience shows that the most successful traders are those who abide by strict limits in risk and money management. They may on principle trade once, twice, five times or even dozens of times per day, but only following triggers set in accordance with their own money management policies. They never trade on impulse but plan each trade however small it may be.
Tip 6) Trading diary
This is of course easy to implement as you are already working at the computer. Even when trading via smartphone, for which binary options are very suitable, you can establish a cloud based file containing the trading diary. You can monitor the frequencies of consecutive gains and losses and the resulting development of your capital. Having for instance already incurred losses of 30 percent you will have to gain almost 50 percent of your remaining capital to recover your starting position. The diary should be helpful in this context, yet not consume all of your time. Documenting gains and losses as well as the maximal draw-down (capital reduction) is essential however. If possible you should note the types of binary options that did – or did not – work particularly well for you.
Tip 7) One hour or one day options. No frenzy!
Binary options are available for various terms, from 60 seconds trades to those with run times of a month and more. A reasonable market prediction is quite possible over the course of an hour, additionally many binary options allow for term extensions. 60 second trades are suitable only during very fast market movements and naturally with very small commitments.
Tip 8) Supporting software such as third party chart tools or market tickers
Binary option brokers are mainly concerned with providing options to the market, chart tools are in part – unlike for instance those of Forex brokers – slightly underdeveloped. This is not based on bad intentions; binary options are of very simple designs and can be traded via smartphone, which is why brokers do away with these tools that otherwise introduce high complexity. However if you want to monitor the markets somewhat more precisely you should utilize tools that provide more detailed and comprehensive representations including indicators. There are very many free, yet very reliable, tools available for this purpose.
Tip 9) Bonus conditions
Many binary option brokers offer quite interesting bonus conditions, however these do not constitute free money. The brokers want to encourage you to trade; the bonus becomes receivable by meeting a certain volume. This is legitimate and by no means dubious, yet it could be wiser for trading novices to trade without bonus. If you notice a tendency to lose, just stop and return to practicing some more. This type of bonus is derived from online sports betting. The bonus always must be “run through” its conditions. This is comparable with shopping where you have to buy some article(s) in order to redeem a coupon. It is a quid pro quo. However one should know and understand the conditions.
Tip 10) Mobile trading
Binary options have developed in parallel with the mobile Internet and are designed for trading by smartphone. Precisely because the options are “binary” or “digital”, forcing a yes or no, you do not have to remain bound to the desktop (for instance if you have been trading for a few years already) and after mobile ordering of the option you can just let it run its course. Take a walk with your smartphone, perhaps you can effectively earn more money that way than by obsessively watching exchange rates. Brokers do offer respective apps for Android and iPhone. Always remember that there are no-signal zones, empty batteries or incoming calls. Find more about mobile option trading here.
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