When trading binary options, it is vitally important that you trade from a place of detachment and rationale. The last thing that should influence your trading decisions is emotions. That said, nullifying heightened emotions or preventing emotion from creeping into your trading decisions is easier said than done. Nonetheless, as a trader this is something that you must do!
Seasoned traders know that the key to successful trading is trading with an optimal mindset and are aware of their emotional state at all times when trading.
Anxiety and excitement
Two of the most common emotional states that you will experience when trading binary options are anxiety and excitement, both of which, when not kept in check, can be a recipe for disaster.
– Yes, you are going to experience anxiety when trading. This is normal. However, anxiety begets anxiety and, if you are not aware of your emotional state of mind, it will prevent you from making trading decisions based on logic and rationale.
For the most part, a trader’s anxiety is borne out of a fear of losing money. Nobody likes to lose money and this is especially true for traders. This fear of losing is compounded by the fact that you are “on the clock” and, depending on the way you are trading (i.e., the binary option product you are using), you may not have any control over the trade once it has been placed.
Before you enter the world of binary options trading, it is important that you first come to terms with the simple fact that you will occasionally lose money, and that not every trade will go your way. Indeed, there will be times when you hit a losing streak and nothing seems to go your way. Once you have accepted this, you will be able to deal with anxiety better when it does start to creep in and raise its ugly head.
– Just as anxiety can cause you to make the wrong decisions when things are not going your way, so too, can the excitement you feel when things are going your way!
Excitement brought on by winning is like a natural high; endorphins race through your body and you feel on top of the world. Such feelings of excitement can cause you to invest more aggressively than you normally would – in search of the biggest payouts. Trading when on this kind of emotional high can be a surefire way of depleting your trading account.
So, as you can see, trading when your emotions are driven by either anxiety or excitement can, and often do, hinder your trading efforts. To trade successfully and optimally, you have to an emotionally balanced mindset.
Recognizing that emotions are creeping into your trading decisions is not hard. You just have to be aware of the telltale signs that your body is giving you. The signs are mostly the same be you in an anxious or excited mental state.
Telltale signs include:
- Increased heart rate
- Sweating (sweaty palms)
- Anxious or racing thoughts
- Nervous energy
- Muscle tension
- Feelings of euphoria (this is a big sign that emotional excitement is at work)
If you recognize any of the above signs, then it is time to take a step back from your computer and do something completely different; something that has a calming effect on you. For some people this could be going for a walk while for others this could be listening to music. It does not matter what you do as long as you disconnect from the trading arena and calm down.
When anxious it’s good to remember this: when things are not going your way, they are not going your way and forcing the issue will not help. Your best friend when trading binary options will always be a calm and rational mind. This you can control. You have no control over the movements of the global financial markets!
When excited and everything is going your way, it can be hard to step back. However, if you find yourself making more aggressive moves than normal, then you need to check yourself and calm down. Keep this in mind: while it is great to make big profits, it hurts when you lose big investments. With options trading, slow and steady wins the race, so never invest more than your account can bear to lose.
At the end of the day, binary options trading will take you on an emotional ride. There are highs and lows, ups and downs. That said, if you let emotion dictate your trading decisions, be prepared to be on the end of more losing trades than winning trades.
The most successful binary options traders are aware of their emotional states when trading and they only trade when their minds are in optimal trading mode – balanced, relaxed, rational, and free from emotion.