Binary options trading is a quick way of winning a huge payout. Quick because traders simply need to analyze the price movement of a given asset. But the catch is predicting the movement is not easy because binary options is a volatile market.
Even after having good market knowledge, sometimes, traders lose money. It happens because traders don’t know when to stop. Or when they trade less than required.
A detailed trading strategy can increase your chances of winning a considerable amount. But if you have not traded appropriately, you can lose even a winning trade.
Overtrading and under-trading is a common occurrence that both new and experienced traders do. But the good news is that one can avoid it. People trade more or less because they are not aware of its consequences.
Through this post, we will help you understand how frequently you must trade, the best time to trade different assets, how to trade like professionals, and how to prevent overtrading.
How frequently should you trade?
One of the best things about the binary options market is that it stays active throughout the day. That means one can trade 24/7. But this does not mean that you should do it.
Although this market remains accessible round the clock, the duration when you can win a huge payout is limited. For instance, you should avoid trading during the weekend. This time, most traders are not active. Also, after the weekend, the massive involvement of buyers and sellers creates uncertainty.
That means you must avoid predicting the price movement of assets after the weekend as well. In an uncertain market, predicting the movement is not possible. So, the best time to trade binary options is when everything gets back to normal.
Maximum daily trades
Honestly, there is no fixed number of traders that you should make. It all depends on the type of strategy that you are using. It would be helpful if you stick by the number of trades that the strategy suggests. This way, you can save yourself from losing a considerable amount of money.
What happens is that after winning or losing the trade, when one starts overtrading, they don’t follow the strategy. They either want to compensate for the lost amount or want to win more money.
Sadly, traders don’t realize that they have started overtrading as there is no fixed number to stop them. But mainly, overtrading comes from a lack of discipline, boredom, and poor trading strategy.
Losing trade due to over-trading or under-trading can easily ruin your trading portfolio.
Types of overtraders
Overtraders can be divided into three categories, i.e., technical overtrader, shotgun overtrader, and discretionary overtrader.
Now, a technical overtrader is someone who uses technical indicators to understand the price movement. But such traders also justify the overtrading problem by blaming the indicator.
Similarly, shotgun traders buy every asset in the market in an attempt to make more money. Lastly, a discretionary over trader is someone who uses leverage and position sizes for making trades.
Causes of overtrading
Whether new or professional, a person can do overtrading due to the following reasons.
One of the most common reasons for overtrading is excitement. It happens when traders see a new position in the market. Then they make a trade without adequately analyzing the market and risks.
It happens when traders perform better. Imagine a situation where you have won three to four continuous trades. It’s natural to wish for more. But stopping at the right time is necessary because a trade done out of greed doesn’t end well.
Lastly, traders end up overtrading out of the fear of losing money. So, they trade more than required, hoping to make up for the losses.
- How to Prevent Overtrading
As we have already mentioned, preventing overtrading is possible. Here are a few ways you can do it.
- Create Rules
While there is no official rule limiting the number of trades a person should make in a day, it’s essential to set a rule for yourself. For each of your strategies, you can set a number of trades. It will limit your losses and increase your chances of winning huge profitability.
- Take a Break
As important as it is to predict the price movement of assets, it’s equally important to take a break. Taking some time off the trading market will help you understand where you are making mistakes. Also, this way, you can know which of your strategies are working in your favor.
The majority of overtraders don’t realize what they are doing. That’s because they lack self-awareness. So, you must practice this skill to stop yourself from making mistakes.
To become fully aware of your trading position, track your trading habits. If the chart shows that you are continuously increasing the number of trades, try to stop yourself. That’s because it’s a sign of overtrading.
Minimum daily trades
Since there is no legal bound, there is no authorized number of minimum trades that a person must follow. That means you should follow the number that your trading strategy suggests.
If you are trading less than what the strategy suggests, you will end up losing a massive amount of money. Certain times traders think that under-trading is not as risky as overtrading. But that’s not true.
Just as overtrading, under-trading can also ruin your portfolio as under-trading shows a lack of confidence in your skills and strategies.
How much to invest in Binary Options?
Although the binary options market can help you win a huge payout, you should not forget that this market is equally risky. So, if you trade a considerable amount of money, it can jeopardize your financial freedom.
Generally, it’s advised to trade around 2% to 5% of the amount. This way, you can freely make assumptions, and your financial condition will not fall.
Best time to trade different assets
No matter what asset you want to trade, it’s always advised to follow the correct time to make a difference.
Timing for stocks
If you are familiar with stocks, you can check the United States market. If not the U.S.A., you can consider the European and German markets. This way, you can know about the right time for trading stocks.
Timing for commodities
While you can trade commodities throughout the clock, they are most active during the following hours.
Natural gas – 9.30 PM EST to 5.15 PM EST
Corn – 9.30 AM EST to 1.15 PM EST
NYMEX.CL (Crude Oil) – 9 AM EST to 2.30 PM EST
Gold – 8.20 AM EST to 5.15 PM EST
Silver – 8.25 AM EST to 5.15 PM EST
Also, the best way to find the commodities trading time is by combining all the similar kinds.
Timing for currencies
Currencies are not just low-risk assets, but one can also trade them throughout the day. But it would help if you only trade them during the most active overlap zone, i.e., New York/London and Asian/London time zones.
Besides international, also check the local time zone. For example, the Australian dollar has more value during the Asian/London time zone.
Timing for index futures
Index futures also have a fixed trading time. For instance, the NASDAQ100, S&P500, DJ30 indexes are traded mostly between 9:30 AM EST to 4:30 PM EST.
Use a detailed trading strategy
Simply limiting or increasing the number of trades will not help you. That’s because a detailed trading strategy can help you reap better rewards. You can also use technical indicators like Bollinger Bands, Moving Averages, Pivot Point, Commodity Channel Index, and MACD.
What is the best time frame?
Did you know that a single time frame does not work for every asset? Generally, traders select a time frame that meets their expectations, strategies, and trading styles. It’s recommended to choose two or three-time frames to improve your chances of winning.
So, it would help if you use the correct time frame because it can change an ordinary trade into a profitable one.
How to become a professional trader?
Becoming a professional trader requires constant practice. Also, you must analyze the trading market and predict the price of assets correctly. But this is not it. There are a few more ways you can become a pro trader.
- One of the reasons why certain traders have a better win than others is because they choose the right broker. With a trusted and reputed broker on your side, you can win better payouts. Also, it’s essential to check the minimum deposit amount, minimum trading amount, and availability of a demo account.
- As a trader, you must never stop your learning process. That’s because when you learn, you develop an understanding of identifying bad and good trades.
- Lastly, it would help if you always create a professional mindset before trading. Professional mindset involves mental toughness, discipline, patience, and adaptability.
The binary option is a famous market where traders throughout the world are marking their presence. But most of them end up losing their money. It happens because they don’t know when to stop or when to trade more.
Thus, it’s essential to set a daily trading minimum and maximum limit. Also, it would help if you only use the recommended percentage of money that you have in your bank account. Lastly, create a detailed trading strategy.