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Thread: Psychological edge in trading binary options

  1. #1
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    Psychological edge in trading binary options

    Traders often come to binary options due to the following reason: they are confused about uncertainty that comes with traditional trading. Where to place your stop, should we move our stop-loss, should we “let profit run” or “take what the market gives” to us?

    There are no certain answers to these questions as we are operating in the environment with high level of uncertainty, ambiguity and conflicting information. It will be right for one type of market conditions to hold position whereas it would be wiser to take profit in the other one. Traders with experience of active trading over 1 year will be agree that there's no certain answers on such questions. All we are able to do is to build hypothesis and stick to it, or to change it due to changing market conditions.
    It's hard sometimes to make reasonable decisions when you have a position. That's why traders often recall worst case scenarios or have extremely optimistic view. They have two outcomes in their minds – “yes” or “no”, but market is often much more complex.

    According to my trading experience, everything of described above happens, when traders fail to distinguish between “analytical mind” and “trading mind”. “analytical mind” is a point of view where we are objective, we see the big picture as well as numerous nuances, we are flexible and can make reasonable conclusion about the market “here and now”. “Trading mind” is something associated with logics of your account, not the market. We tend to stick our attention to something that threats our position or gives a hope for quick profits. “Trading mind” switches on when we are in position. That's why most analytics in hedge funds or other serious institutions are not permitted to trade – they have to be neutral.

    So, you might see that traders face a very difficult task – they have to judges and players at the same time. Imagine that judge in the soccer game was permitted to make bets on outcome of the game. How do you think – would they be good judges in this situation? For most people, be an observer and a participant at the same is a very tough task, when they try to get inside of mind of their competitors, all they have is stress and emotional discomfort. Now you understand why many traders fail after they transition from demo to real money account.

    Trading options is a way to distinguish two positions of perception (“analytical” and “trading” mind). Thus, we can analyze one market (chart of the currency pair) and trade on the other. When our attention is not absorbed by getting stopped out of your position, you can pay 100% of your attention to process of trade selection. Of course, in this case you will more than likely spot a good opportunity, repeating this positive cycle in the long run.

    That's why, if you feel that you experience difficulties in making good analysis when having paper profit or loss, try trading your strategy with binary options and see what happens.

    P.S. Of course, if you are trading big trends, it can not be replicated in trading with binary options (they have limited upside for profit).

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    Last edited by Value trader; 01-15-2015 at 10:48 AM.

  2. #11
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    You must understand the psychology of what you are doing with binary option trading. You should link the timing, the trading strategy and your plans together. In this light, you should understand the way you want to risk per trade, this will make your trades manageable, and gives you the best out of what you do in the market trading.

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  3. #12
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    It is interesting that history why the binary option now be the one of trading in financial market. Can you show me the background and the complex history when and where why the binary option is now so popular besides forex trading and stock for CFD trading? I rather interesting to know more about binary option trading

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  4. #13
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    [lang=ar]i can`t imagine that we may locate any importance for the physical aspect in the trading processes and I want to add that as i can understand from your post . that all the effort of the trading processes is on our mentally thinking . we may find that it is better to think well than to effort physically[/lang]

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  5. #14
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    I believe mindset within binary choice is actually easier, simply because investors aren't worried about flying large without, since the incorrect evaluation. The actual binary choice while using run out period. investors restrict reduction through period, and can just shed the actual agreement. binary choice is extremely fascinating, this can be a brand new method of buying and selling, I believe later on, by means of binary choice buying and selling, is going to be popular with numerous investors.

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  6. #15
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    Quote Originally Posted by nosa33 View Post
    [lang=ar]i can`t imagine that we may locate any importance for the physical aspect in the trading processes and I want to add that as i can understand from your post . that all the effort of the trading processes is on our mentally thinking . we may find that it is better to think well than to effort physically[/lang]
    Is there any connection with the topic?
    Quote Originally Posted by silverlady View Post
    You must understand the psychology of what you are doing with binary option trading. You should link the timing, the trading strategy and your plans together. In this light, you should understand the way you want to risk per trade, this will make your trades manageable, and gives you the best out of what you do in the market trading.
    I think we must understand the psychology of what we are doing even though in traditional trading, not only in binary option trading. Also there are timing, strategy and plan in the traditional trading, The difference is that we do not stress to determine exit points and target point in binary option trading, we only analyze the direction of the market in a set duration.

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    If you lose, be patient. If you win, stay humble

  7. #16
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    In binary trading timing is every thing. Although I don't really like to trade in binary. I do study binary as I do want to take advantage of the situation also. For me binary trading is like scalping. You just need to predict if the trends is going bullish or bearish before the binary time expires. Although in my part its seems like gambling. But with some strategy some how we can take advantage of this.

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  8. #17
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    Quote Originally Posted by budado View Post
    In binary trading timing is every thing. Although I don't really like to trade in binary. I do study binary as I do want to take advantage of the situation also. For me binary trading is like scalping. You just need to predict if the trends is going bullish or bearish before the binary time expires. Although in my part its seems like gambling. But with some strategy some how we can take advantage of this.
    I think scalping is not only need to predict if the trends is going bullish or bearish, scalping is the same as intraday trading and long term trading but differ in the duration of the trades. While binary option is limited by time, as well as profit and loss we are limited, yes maybe it seems like gambling.

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  9. #18
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    Quote Originally Posted by mehwishraheel View Post
    Really, this is true that people need ease with less risk, they know that forex market is a high risk market, but they don't see this, they just see the high returns in this business, that's why they seek some expert advisers, some scripts, someone to copy or someone with PAMM account to invest and earn money with less efforts, now they can do that with the help of binary options, so they get attracted with this option. They need less risk, and this is available in binary option, but main thing that is needed in this business is called analysis, and that is too much difficult. :)
    i use the metatrader4 for iphone in apple store and i see its very closet because you cannot use it as well as the windows version who can use a lit of options to trade easily with some costume indicators or experts or scripts
    so please give us a best metatrader for mobile ... ios , android
    Greed is actually temptation to acheive high and higher profits through any right or wrong in forex, this can be harmful not only for yourself but for greedy traders are actually harmful for forex as well other traders.

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  10. #19
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    I believe mindset within binary choice is actually easier, simply because investors aren't worried about flying large without, since the incorrect evaluation. The actual binary choice while using run out period. investors restrict reduction through period, and can just shed the actual agreement. binary choice is extremely fascinating, this can be a brand new method of buying and selling, I believe later on, by means of binary choice buying and selling, is going to be popular with numerous investors.

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  11. #20
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    [lang=ar]I think that the psychological side of any trader has two edges between which the trader is very confused and have a problem . any trader may be limited within the worry and anxiety while the trading . also some times the fear control his feelings of the trick of the market . and try to calm down himself by patience[/lang]

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