Develop the Right Mindset for Binary Options Trading


When starting out, newbie retail traders often want to jump into accruing technical know-how (and jargon). A trader’s overall mindset is far more often the dividing line between those who succeed and the rest. Discussing emotions and state of mind when dealing with hard-nosed trading realities might seem silly, but nothing could be more valid. 

Most Important Facts About Your Trading Mindset:

  • Newbie traders often prioritize technical knowledge, but the trader’s mindset plays a more significant role in success than technical skills and jargon.
  • Binary options simplify trading by focusing on predicting an underlying asset’s future value; they offer either a fixed gain for a correct guess or a complete loss for an incorrect one.
  • Emotional attachment to money is dangerous in binary options trading. Successful traders maintain equanimity, accepting losses as learning curves and avoiding emotional decision-making.
  • Discipline is directly correlated with trading success. Professional traders emphasize discipline, continuous learning, and adherence to a well-thought-out trading plan.
  • Viewing losses as opportunities for improvement is crucial. Chasing losses emotionally is discouraged, and successful traders analyze losses objectively to enhance their trading strategies.

All the technical skills and innate talent won’t help one iota if you’re trading emotionally. This is true in binary options trading, forex, or any kind of speculative trading. Not convinced? Read on. 

5 Steps to Develop the Right Mindset for Binary Trading

1. Understand the Basics in Binary Trading

Mastering the fundamentals is vital in binary options trading. Neglecting essential aspects can lead to significant losses. 

It’s crucial to grasp that a binary option fundamentally simplifies an options contract. This simplification can create the illusion of simplicity, as the focus is on predicting the future value of an underlying asset at a specified date.

Only two possible results exist with binary-you gain the agreed, fixed amount for a correct guess, or you lose your investment entirely.

Let’s say you enter a binary option contract worth $200 that will pay you a 90% return if a company’s stock rises $10, say from its current trading price of $50 a share to $60 a share, by a given date. 

If the company’s stock rises by $10 on time, you’ll be paid out your $200 plus a 90% gain-$180 for a total of $380. Not bad for a guess. 

However, if the company’s share performance doesn’t fulfill the contract, you get nothing. Zero. You lose your investment entirely. No ratchet check is possible, as there is in forex if you see a trade going against you. 

With binary options, you win or lose. That’s it.

2. Don’t Be Emotionally Connected to the Money

There is no room for any emotional connection to your trading kitty, no matter what you’re trading, and with binary options (the realm of seemingly simple, easy wins but also wholesale losses), emotional attachment is particularly dangerous. 

Equanimity is the trader’s best friend: steady when winning, steady when losing. The truth is everyone loses sometimes. Don’t be fooled by those who claim they never lose a penny, and remember that the ideal track record is to win more than you lose

Get ready to accept losses as learning curves and make your peace with them. That is the only productive approach towards inevitable losses. A series of wins can inspire a feeling of smugness that is as dangerous to sound trading as is the feeling of desperation inspired by losses. 

Intelligent and competent traders always keep their emotions out of it. Without that emotional mastery, the road ends

Speculative trading is only for those who can contain their emotions sufficiently to stick to their trading strategy.

3. Stay Disciplined

There is a direct correlation between discipline and success in trading anything. Big scores and yo-yo rides are for the movies. Good traders are disciplined, boring even and proud of it. 

Forget the picture so often presented by those who would skim some profit off you, and remember that discipline remains a trader’s greatest tool.

It’s guaranteed that traders who make it a long-term success manifest discipline, discipline, discipline. 

They put in the study time and apply what they’ve learned. Only a disciplined approach will allow you to understand your losses and return the next day with an improved game and money left to trade. 

Traders without discipline aren’t traders; they’re gamblers, and the casino would then be a better bet.

4. Focus on the Trading Plan & Journal

Just as athletes spend time on exercise and training, so too do competent traders take the time to work out a trading plan. Put another way, binary options trading is a high-volume-low-margin game, in conventional business speak. Small gains that were carefully executed, gradually build wealth over time. 

Your trading plan and journal are the only things that will allow you to determine a pattern and manifest improvements for tremendous success. Otherwise, it’s the roulette table and nothing else.

No professional trader goes to work and “wings it,” hoping to come out clean. For all the cowboy posturing and Hollywood imagery associated with trading, every professional trader lays down their plan and works it for all it’s worth. 

You may tweak your plan or change it substantially over time, but unless you’ve been following it, you might as well be throwing darts at a dartboard. 

5. Don’t Get Emotional on Losing Streaks

There is only one way to view losses, and that is as an opportunity to learn and improve as a trader. A loss is a gift to be analyzed so you can better avoid one the next time around.

View losses as school fees that will one day make you a qualified and successful trader. Chasing losses is trading suicide, and you might as well take the cash and throw it off a tall building. At least that way, you’ll make the News at 7. 

Managing the emotions you experience when suffering a loss is the most common ailment of retail traders because many can’t do it. If you get emotionally attached to taking a loss, you’ll throw good money after bad and pile on a bunch of lousy trades (probably before the close of business, too, on the day you take that loss), and almost none will pay out. 

Why? Because they were spurred and informed by feeling burned rather than competent analysis and measured investing. 

Think of your emotions as a robber with a gun who shows up to steal your cash because the results are likely to be the same: you end up poorer. 

The greed that can be inspired by wins and the anger and denial that can rise when suffering losses are all members of the same gang. They’re dangerous, ruthless, and smart traders who shut the door to them.

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Trading Psychology

The vital role of trading psychology in the binary trading mindset cannot be overemphasized because nothing else will hold together without the ability to see your losses, for example, as part of the learning curve. 

Trading binary options requires chart analysis and the interpretation of market trends, but it also requires understanding emotions and the behaviors they can trigger in equal measure. For many, meditation or visualizations help manage emotions, and if you need to get up and take a long walk after an ugly hit, do it. 

Successful traders do whatever they need to do to be both ready for losses and able to wring some benefit out of them when they occur. No one likes losing money, even a little bit, but successful traders take it on the chin and use it to improve performance tomorrow with renewed confidence. 

Buddhist monks speak of the “monkey mind” that the human mind is both a hindrance to and a means of tranquil meditation. 

Similarly, traders need their wits about them, but their emotions are a liability to success. It’s not too dramatic to say that successful binary traders need emotional awareness and mastery akin to meditation practitioners. When emotions govern trading, money is lost. It’s that simple. 

You’re in the winning lane when you can experience emotions, recognize them, and put them aside to focus on your strategy.

Conclusion: Mindset Matters

Trading binary options requires a specific mindset, and although it’s not necessarily a particularly sophisticated or highly complicated one, it doesn’t tolerate even minor aberrations. 

In other words, the fundamentals must be solid in binary traders because a slight impulsive deviation from a trading plan typically bites back hard, as does a laissez-faire approach devoid of adequate research and caution. 

Chasing a single loss because you’re wound up about losing can deplete your kitty in a matter of days and sometimes hours. 

Don’t forget that it’s easy to over-extend in trading, especially when you’re not closing out quickly. If several impulsive trades come home to roost down the line, and most cost you, it’s a short route to being out of trading altogether. 

Discipline, caution, and the quiet joy of a slowly growing trading balance are the hallmarks of success in binary options trading. Far too many impulsive traders who “know the money is there to be had” crack a pace and an investment level they cannot sustain over the medium term. 

The money is only there for traders who formulate a plan, stick to it, record their progress, and avoid the cash-sapping vortexes of emotional responses to losses. Binary options trading is a simplified options contract, but a few simple dictates must be diligently followed for success. 

In binary trading, slowly-slowly wins the race. Fast cars crash and burn, but cautious and persistently disciplined traders reap the rewards. 

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Most Asked Questions:

What sets apart successful binary options traders from the rest?

Successful binary options traders attribute their success more to a disciplined mindset and emotional control than technical knowledge. While technical skills are important, mindset plays a crucial role in navigating the complexities of trading.

How do binary options work in terms of potential gains and losses?

Binary options offer a simplified trading approach where traders predict the future value of an underlying asset. A correct prediction results in a fixed gain, while an incorrect one leads to a complete loss of the invested amount. There are no partial wins or losses in binary options trading.

Why is emotional detachment emphasized in binary options trading?

Emotional attachment to trading funds can be detrimental, especially in the volatile world of binary options. Successful traders remain emotionally detached, treating losses as part of the learning curve and avoiding impulsive decisions based on emotions.

How important is having a trading plan in binary options?

Having a well-defined trading plan is crucial in binary options trading. Professional traders emphasize the significance of discipline and sticking to a plan, as it helps make informed decisions and avoid impulsive actions that can lead to significant losses.

Can losses be beneficial in binary options trading?

Yes, successful traders view losses as opportunities for learning and improvement. Instead of emotionally reacting to losses, traders analyze them objectively, using the experience to refine their strategies and enhance their overall performance.

About the author

Marc Van Sittert
Marc Van Sittert is an experienced Binary Options Trader and coach who is originally from South Africa. He started his career in 2014 by trading old-school Binary Options online. His main focus is on short-term contracts with 60-second trades.

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