In binary options trading, the price of an asset is of utmost importance. After all, everyone trades to make more profit. Besides the price, volatility, volume and strategy are also essential aspects of trading.
That’s because, without an accurate trading strategy, you cannot convert an ordinary trade into a profitable one. And for developing a detailed strategy, you should have a basic idea of the asset’s volume and volatility.
But even after having a detailed strategy, sometimes traders end up losing money. You might wonder why? That happens because traders do under-trading and overtrading. Meaning, traders don’t realize when they should make more trades or stop making a trade.
Whether you are a new trader or have been trading for a while, you might do overtrading and under-trading. That’s why it is necessary to know minimum daily trades and maximum daily trades.
Moreover, you should also know how much you should invest in trading and the best time to trade different assets.
This guide will answer all these questions.
The binary option is an all-or-nothing market where you can trade throughout the clock. But this doesn’t mean you should trade all the time.
You should especially avoid trading during weekends because, during that time, most traders are not active in the market. After the weekend, when a large number of traders return, the market gets unstable.
That’s because buyers and sellers try to control the price movement of assets. If you trade in an unstable market anyway, you should be ready to lose because it’s impossible to speculate the price of an asset at that time. So, you should wait till the market gets back to normal.
The number of trades you should make in one day depends on the trading strategy you are using. But if you are trading more than what the strategy suggests, you might erase your edge in the binary options market.
When you overtrade, after a while, you don’t follow any strategy. As a result, you end up losing the traded amount. After losing, some traders make revenge trade to compensate for the loss. But since they trade outside of a trusted strategy, they lose again.
Overtrading also highlights other underlying problems like lack of discipline, boredom, and poor trading strategies.
Since there is no law for overtrading, traders don’t realize when they should stop. And this, in return, damages their trading portfolio.
You can divide overtraders into three categories, i.e., discretionary overtrader, technical overtrader, shotgun traders.
Discretionary overtraders are the ones who use leverage and position sizes for making trades. On the other hand, technical overtraders use technical indicators to justify making more trades than required.
Lastly, shotgun traders are the ones who buy every asset that is available in an attempt to make more money.
Several factors result in overtrading. Here are a few of them.
Most traders overtrade out of the fear of losing money. So, they overtrade to make up for the losses.
Sometimes, when traders are doing well, they get a feeling of making more money. When a trader starts trading out of greed, they don’t follow a proper strategy and lose.
When traders see a new position in the market, they start moving quickly without doing proper analysis.
While overtrading sounds like a problem and has become common, there are a few ways to avoid it.
Every day, after trading for a while, you should take a break. When you take time off from the market, you get time to reevaluate your trading strategies and figure out how much more trade you should make.
Another proven way to stop overtrading is exercising self-awareness. When you practice this skill, you understand when you are overtrading, and then, you can prevent it from occurring.
You can keep track of your trading habits to know your position in overtrading. If you notice a continuous increase in the number of trades you make every month, this can be a sign of overtrading.
While there is no legal rule that stops overtrading, you can create one for yourself. When you design a trading plan, you limit how much trade you can do in a day. It further brings down overtrading.
Like maximum daily trades, the minimum daily trade limit also depends on the kind of trading strategy you use. If you are trading less than what your strategy suggests, it will result in under-trading.
Some traders are under the impression that under-trading is better than overtrading. But in reality, none of these is better because, in either case, traders lose money.
If you under-trade for a long time, it can take you away from some excellent trading opportunities. Also, under-trading can damage your trading portfolio.
The binary option is not an investment, but it’s a market where you trade by speculating the price movement of an asset. In short, you bet in this highly volatile market.
So, when you are betting, try not to spend more than 2% to 5% of the amount that you have in your bank account. Several traders follow this money management rule as it gives financial independence.
If you don’t want to follow this rule, you can simply figure out an amount you can afford to lose. After all, binary options are an all-or-nothing market. That means, if you have wrongly speculated the price movement, you will lose the entire traded amount.
So, after analyzing your financial condition, you can set an amount that you want to invest in the binary options market each month.
Since each asset does not have the same trading hours, it’s essential to know proper trading timings.
Most stocks are traded for 6 to 8 hours daily. You can check the United States market to know the trading time of stocks. Besides the U.S.A., you can also consider the European and German markets to know the timing for stocks trading.
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
You can also know the right timing to trade commodities by grouping all the similar kinds. For example, all the agricultural commodities are active from 9:30 AM to 1:15 PM EST for trading in the Chicago Mercantile Exchange.
Just like commodities, you can also trade currencies throughout the clock. But you should only trade them during the most active overlap zone, i.e., New York/London and Asian/London time zone.
Along with this, you should also consider the time zone of local currencies and local markets. For example, the Australian dollar has more value during the Asian/London time zone.
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.
If you want to avoid losing money in binary options trading, you must develop a detailed trading strategy. You can also use popular technical indicators for accurately predicting the price and analyzing the market.
Additionally, you must remember that a single trading strategy will not work for every trade. That means you need different strategies that meet your trading needs.
By trading in the right time frame, you can change an ordinary trade into a profitable one. But there is no best trading time frame.
You should choose a time frame that meets your needs and matches your trading style. Also, it’s important to look for two or three-time frames to improve your chances of winning.
You can follow a few tips to become a professional trader and take your trading game one level up.
- You should never stop learning. When you learn, you get a better perspective of trading, which helps you avoid bad trades.
- You should choose a broker that has multiple features. When looking for a broker, don’t forget to check the minimum deposit amount, minimum trading amount, and availability of a demo account.
- Before you start trading, you should develop a professional mindset to have mental toughness, discipline, patience, and adaptability.
The binary option is an exotic trading market where you can make a huge profit by correctly speculating the market. But even after making accurate predictions, if you are trading more or less than required, you will lose.
So, it’s important to follow the minimum and maximum daily trading limits to avoid overtrading and under-trading.