In previous articles, I have shared my experience learning binary options the hard way. After day 1 and day 2, here is the first week wrap-up of my journey in trading digital options as part of my learning process.
Learning binary options: emotions are a bitch
I knew that, beside learning the technical analysis part, refine timing, fully grasp the binary options strategies and execute them, my biggest challenge would probably be to handle my emotions. After a week learning binary options and trading, this is more than ever true. Digital options are very addictive, very fun and fast paced. It is highly entertaining when you win, but when you start to lose, sometimes within a hair, it can be frustrating. That’s when your emotion can kick in and harm you. Three big temptations will start to manifest themselves:
- The desire to raise your stake to recoup a loss
- The idea that your strategy is wrong, and to change it
- To overtrade
This is the temptation every binary option rookie experiences very early: doubling down the next trade to recoup losses. It will work until it won’t, to put you eventually in deep trouble especially when you repeat this doubling down several times. This technique is known as “martingale”. It is around since the 18th century (it appeared in France for betting purpose, when binary options were not known of course). If it was a foolproof method to win money, it would be known by then, right? The only instance in which it can work is if you have unlimited funds. And even it would not be enough, as the maximum stake of most bets is capped.
Doubling down might save the day here and there… until it blows your account. It will happen. Now if you are a gambler and like this kind of emotion, very fine. But then you won’t make money with binary options, you will just buy yourself adrenaline shots.
Change your strategy after each downturn
One thing is for sure: successful binary options traders are people using strict and refined strategies. Ok, they might change their strategy according to market conditions. Still, they use them among the arsenal that they acquired. Those strategies are proven, although their performance won’t be exactly the same every day, every week or even every month. It’s not because a strategy didn’t work for a week that it became suddenly not valid. Many traders, even experienced, make the mistake of changing each time things are not going the way they want.
Overtrading digital options
When you start to lose, which is probably what will happen at the beginning (even substantially in my case, my actual 43% win rate is nothing to be proud of, even as a rookie), you might get tempted to overtrade. There might be some truth in the saying “think long, think wrong”. But multiplying trades is definitely not the way to go. In general avoid trading when you are tired, when you are nervous… In short, when you are not in optimal conditions to take good decisions.
As a complete beginner who only starts to acquire the tools necessary to trade binary options, I made those mistakes.
First week in digital options trading: conclusion
Losing when you start trading binary options as a beginner is somewhat normal. Still, it is sometimes hard to accept and discouraging. This frustration impacts your decisions, and you might go into a vicious circle that will lead you to give up, or at least think about it. The impact is less if you trade with a binary options demo account, of course. But still, struggling with fake money is still struggling.
I’m convinced that almost anybody can understand and execute binary option strategies that are proven to work over time. The most difficult part, to my opinion, is to be able to follow “like a robot” a certain discipline regarding how you manage your account, how many trades you take per day, how you cope with failure. Basic technical analysis that you need to trade binary options is no rocket science. It can be learned. Emotions control is a skill that is way harder to acquire. I will focus on this in the following weeks. When I took the decision to learn binary options trading, I thought it would be an attempt to “tame the markets”. But I didn’t know that, on top of that, it would be mainly a fight against myself 🙂