This is a guest post by Michal Kuchar, a retail trader of binary options and forex, founder and owner of tradingbeasts.com.
On the internet you can see more and more often some kinds of online trading, especially binary options trading. Therefore I have decided to create this article in order to enlighten you this type of trading so I could provide you my own experience and my own opinions on this type of making money.
First, I will explain you what the term „Binary options“ means and where it came from.
So binary options are a financial instrument on the stock Exchange, just like for example forex or CFD. In these modern times you can do everything online, and so can you trade binary options. Binaries first came to light back in 2009, since then they began to spread fairly and started to get into the subconscious of completely ordinary people who has no previous experience in online trading.
And how is that possible?
Well, because binary options have super easy to understand principle, which is based just on predicting whether price of a certain asset will go up or down in a given time.
You as a trader might for example choose to trade gold, silver, or stocks of Apple (or many more) and you have to decide when the price of your asset will be lower or higher than it is now (for example in 5minutes, in 1 hour, or even in one month). If this prediction will be correct you make money, usually around 70-85% from your initial investment.
Pretty easy principle, am I right? Yes it is, but trading itself requires certain skills. After all, how we determine whether the price will go up or down? Well, it’s not quite as simple as it first may seem. Fortunately, we can use different binary strategies and analysis that will help us to increase our success. Let’s have a look at my 10 tips, which recommend following to every binary trader.
1. Start with free demo account.
I know that trading on a free demo account might not be as much fun as trading on a real account, however until you have a solid strategy this is a must. Once you will be sure you can profitable trade you can jump on real account. However do not make the number 1. mistake that almost every newbie trader do.
2. Trade assets you know.
Do you survey some assets in your free time, just because you like to know what’s going on with them? Make advantage of it! Every additional information you know counts and make the edge whether you make a correct prediction or not
3. Follow your strategy.
Did you test your strategy and do know it working? If so, do not definitely pull from it when you already trade, I know from my experience that it’s never a good thing. Therefore I recommend following your trading strategy to the last detail.
4. Don’t forget about money management.
Money management is very underrated in the world of trading, however you will sooner or later know that it is as much important as any other strategy. Therefore it’s the best to make your MM right from the beginning to avoid future unnecessary losing streaks.
5. Make a trading diary.
I have traded binary options and even forex for a while without using a trading diary, however that is a very bad thing.
And do you know why? Well, because trading diary can significantly help you to find out why are you making bad traders and when. For example I detected that I have around 10% more loses whenever I trade on Friday (probably because I am already super excited about the weekend), and I made this deduction just thanks to a trading diary.
6. Watch out for fundamental news.
Every important fundamental news can swing with the market, so watch out for important news like NFP, US GDP, BoE, BOJ and others. You can find all of them in the economic calendar.
7. Don’t risk more than you can afford.
You don’t have enough money to start trading now? That’s okay, you might have it later, however do not borrow any money from your friends or family members just to trade. This is a rule which must every trader follow, so never invest money that you cannot afford to lose.
8. Keep your emotions elsewhere.
Emotions are a good thing, but not in the trading world.
So let them at your girlfriend’s place or elsewhere and do not involve them in your trading. A trading diary will help you with tracking down when you unintendedly used your emotions.
9. Surround yourself with people with the same interest.
Having people around you that trade as well might help you to increase your win ratio, plus you will me more motivated to trade.
You might not be able to find your forex buddies somewhere nearby, but do not worry you can look for them on internet forums, discussions or even on FB (look for groups).
People constantly shares their opinions there and you can learn from other more experienced traders .
10. Never stop learning.
Learning is in this niche a never ending process which you will need to get used to. In the best scenario you will embrace this fact and enjoy it.