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Thursday, 7 March 2019

Overcoming Losses in Binary Options Trading

It is a common understanding that trading always has risks. Both forex trading and binary options, there is always a risk of loss that accompanies each of your positions. Many tips have been shared to anticipate losses, but what about how to overcome the loss that has occurred?

Yes, prevention is better than cure. But are we sure to be free from "pain" just by doing acts of deterrence? In trading, we can try to run the strategy as best we can, but still there is no guarantee if we will never experience a loss. No matter how good our trading method is, losses are inevitable. The ever-uncertain market conditions make us always have to be alert, both with anticipatory and responsive actions.

Being a successful trader not only learns how to anticipate risk, but also knows how to respond to losses. As the saying goes, it's not complete if in our lives just taste the sweetness. To become a truly mature trader, perhaps we really need to feel defeat, learn from it, and rise to become a winning trader.




Stage 1: Reduce

This step can also be called the prevention stage. If you can do this step correctly, you may not need to carry out the next steps. Although the essence of this paper is to explain the tips for overcoming losses, there is nothing wrong with talking about anticipatory actions first.

Reduce Negative Views Against Defeat
Almost every beginner trader will experience defeat, so this is often said to be a natural thing and even must be experienced by every trader. But not all newcomers think so. Some of them actually hate defeat, shame if they experience loss, and consequently do not want to take into account the possibility of loss at all.

How can you prepare to face defeat if you do not want to accept it? In fact, loss is inevitable because it can happen to anyone. Both beginner and professional traders have suffered losses. So, if you still think that experiencing loss is a shameful thing, change that way of thinking. Think of loss as something that can always happen and start learning to anticipate and minimize it.

Reduce the amount of defeat
You really can't predict exactly how many times your option will be in-the-money (won) or out-of-the-money (lost). But we can increase the chances of winning by consistently applying the strategy and avoiding the opening of the "impromptu" option. What is meant by "impromptu" here is the unplanned trading positions that you open only because "while there is an opportunity" and actually not part of your trading system. Such option positions are usually placed only because of momentary emotions, perhaps because you are interested in seeing price opportunities that seem to be profitable, or to avenge a defeat from a previous position.

Here, the real key is to apply a high level of discipline to the use of your trading strategy. Losses from positions that have been placed in accordance with the strategy are part of the investment plan, calculated and easy to give up. But loss in unplanned positions will obviously increase unnecessary losses, making your profit percentage unstable and eroding your trading account quickly.

Reduce Amount of Loss
This section is directly related to risk management, which in general is applied to minimize potential trading losses. It is common knowledge if we will feel more burdened if trading with large capital. Reducing the amount of capital can be the first step in managing your risk management. For example, you can set a rule of maximum 5% of the total capital when setting the number of capital per option position.

On the other hand, you can also look for brokers who provide refunds or stop loss-like features such as "sell back" and "early closure".


Stage 2: Respond

Prices often move up and down beyond expectations. When you open a "call" option with an expiry time of 1 hour, a decreased price movement will make you worry if the option will end out-of-the-money. In these situations, you are very vulnerable to being influenced by emotions that can get you off track from the proper trading strategy. Then, what can you do to respond to a situation like this?

Regulating Emotional Conditions
If you already have a proven trading strategy and risk management that you have calculated carefully, then you should no longer be anxious about the ups and downs happy when the option is still running. If you are still overwhelmed by excessive worry, then that means you don't have a strategy that is truly tested and you can count on it.

Price fluctuation is a normal phenomenon faced by every trader. Face the loss with a "cold head" and try not to do things outside the plan that can endanger your position. Don't panic in the face of a market situation that moves against your options. Analysis of price movements objectively and start looking for solutions that can be done.

Looking for a Solution
This method can be done if you trade with a broker that provides sell back features, early closure, rollover, or take profit. Between sell back, early profit, and take profit actually has the same principle, namely to close your options earlier and return some of your capital. This technique is very effective to reduce total losses if the price is indeed not possible to move to a profitable level when expiry time arrives.

Meanwhile, rollover has a function to extend your expiry time. This method can save your options if you have previously estimated expiry time, because it turns out the price takes longer to move to the level you expect.

These features are usually commissioned, so you cannot arbitrarily use this service whenever the price moves against your position. Therefore, facing price movements with a cold head once again is very necessary so that you can find the most appropriate solution to implement.

However, what solutions can be taken if the trading platform of your chosen broker does not provide these features? In this case, there is no other way you can do but accept defeat. One defeat does not mean that you will continue to fail. If you have previously used risk management and trading strategies consistently, then the defeat is actually a possibility that has been taken into account and there is no need to worry too much.



Stage 3: Fix

You have been struggling to be consistent with the strategy but still loss? Already implementing risk management but still experiencing a lot of drawdown? Then why do we do all of the above if the results are like this?

Anticipation is only anticipation. It's not the thing that really guarantees your success. Although it can increase the likelihood of winning, there is still a gap that can befall you. If you have successfully applied the first and second stages, and have not experienced the situation as in the questions above, then Congratulations! You have succeeded in becoming a trader who is able to deal with losses well. But if you are still hit by a failure that you think is quite significant, then you need to follow the next stage of "fixing" trading.

Become a Smart Loser
The key to recovering from trading losses is to motivate yourself to become a "smart loser", who is able to make failure a new opportunity for success. By transforming yourself as a smart loser, you are one step closer to becoming a "real winner". Given that in the long run we will definitely encounter difficult situations and may experience defeat, a winner must certainly be able to rise from a failure to be able to continue his trading career.

Trading Evaluation
After experiencing a number of failures in binary options trading, it's good to pause and evaluate both the performance of your strategy and trading psychology. Do not do an evaluation when you are still mastered by trading emotions, because your judgment will be biased by these emotions.

Every defeat must have a cause. There is no harm in making a trading journal to find out the source of the error that caused your binary options trading loss. But before adding changes or even changing your trading system, first identify whether you have previously run the system consistently. If you find that you are still lacking in discipline in running a strategy, often opening a position when there is no valid signal, or not consistently implementing risk management, then you need to fix your trading psychology. The solution, try to improve your sense of discipline and reduce your emotional involvement in the next trades.

On the other hand, if you have consistently run the strategy and are always obedient to risk management but still often fail, maybe it's time you change your strategy settings or risk management. If the problem is the frequency of defeat that is still high (you are more often profit than loss), it could be your strategy that is still problematic. Conversely, if you have often been in-the-money on several trades but the amount of your loss is greater than you can afford, then the problem is probably risk management.

Take a lesson
There are many lessons that can be taken from a failure. As mentioned in the points above, you can more easily see the cause of failure by conducting a trading evaluation. Both in terms of psychological and technical, you can draw and conclude useful lessons to improve the way you trade in the future.

However, a failure can effectively teach what things should be avoided and how to overcome a problem. Rising from a defeat will also train you mentally to become an optimistic trader and never give up.

Read to Optimizing Inside Bar in Binary Options Trading
Raed to Exotic One Touch Variations in Binary Options

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