Using Risks as a Strategy

Posted by OliverPearson 0

Using Risks as a Strategy

The key ingredient for success in binary options trading is an investor’s mind. The first step to coping with risks is to accept the fact that they really exist.

As soon as you understand that risks always accompany any investment, use them as a part of your strategy. Understand your mind, and then choose a trading style that fits you best.

Say, if you want to make a quick profit, and you are quick in decisions, like to risk, and you are stress resistant, you need to invest in binary options for a short period like 5 to 10 or 30 minutes.  

If your strong point is a thorough analysis, precise projections, and weighted investment decisions, then long-term binary options trading is a right choice for you.

A professional investor always follows a chosen strategy

Like a professional trader who successfully trades binary options, you need to be consistent.  Investors who always adhere to chosen methods or a certain sequence of steps make mistakes seldom. In trading, any deviation from a chosen binary options strategy is a mistake.

The most common mistakes made by investors are as follows:

  •  An investor exceeds a limit of losses he has set;
  •  An investor leaves trading before the planned time;
  •  An investor uses the strategy that doesn’t match general conception or doesn’t simply work;
  • An investor chooses an option that doesn’t match his strategy.

 

The mistakes like the above said both entail losses and make an investor feel less confident in his competence.

Emotional risks

Typically, an investor makes mistakes if he succumbs to negative emotions after two or three losing investments, and then he fails again and again. This is exactly what happened to Nick Leeson when he invested in options on Nikkei 225. This reveals in full force if before investment you were absolutely confident in success.

After a negative result and with no money left, investors get angry because of disappointment, and some even want to take revenge on the market (you can watch ‘Bailout: the Age of Greed’/Assault on Wall Street’ with Dominic Purcell , and you’ll see what I mean).

If you keep investing following your emotions and trying to get your money back, you will make the same mistakes and lose even more money.

For instance, after a successful deal, you can believe that you won’t lose anyway and keep investing using the same method or strategy. However, the market environment can change quickly, and you will lose because you won’t manage to adapt your strategy to new conditions.

A professional trader accepts potential risks and hence controls his emotions. Traders who are absolute confident in success and don’t have in mind potential risks accompanying a purchase of a binary option, will feel a storm of negative emotions andstress if investment turns out losing. This is the reason why experienced traders advise newbies to include potential losses into their estimates. Thus, a trader has to take investments as a way of testing his forecasts and projections.

 

Once you have understood that investments are always accompanied by risks, you will stop fall in despair each time when you lose.  This approach will allow you to minimize future mistakes provoked by emotions.

Quite a few traders find it difficult to accept that risks do really exist. Therefore, I advise you to use the following two tips to accept this fact.

  • Make a well-thought-out decision about buying a binary option, and consider all steps beforehand.
  • Try to figure out as precisely as possible a period for which you make a projection.

 

If you follow these simple tips, you will stop making snap decisions. Anyone, even experienced investors like Faber, Mohamed Al Arian or even Buffet, can succumb to emotions, while right decisions can be made only if you are reserved.

Also, you need to decide how much you can afford to lose. And if you lose, treat it as a way of gaining experience. However, no matter how experienced and successful investor is, he is not safe from making mistakes. A mistake in investments like in any other business is quite an ordinary thing.

Once you understand this evident fact, you will stop taking failures to heart, and you will be able to control your emotions and hence you will make fewer mistakes and increase the number of profitable trades.

Invest in binary options with AnyOption, the reliable broker. This will also help you minimize your risks because in case of failure, this broker pays back 25 percent of your investment to your account.

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