Becoming a professional trader in the binary options market is a dream career for many people who desire the limitless opportunity for financial growth, personal independence from rigid corporate structures, and the ultimate convenience of working from home. After all, who doesn’t want to avoid the morning road rush or the occasional office drama?
What Does it Take to Go Pro?
Becoming a consistently profitable trader, however, requires more than just a funded account and the willingness to hit buy and sell buttons every day. Going through the learning curve without any shortcuts plays a key role towards achieving zenith in the trading profession. You’ll have to master the technical, fundamental, and psychological sides of the trading business, both individually and interdependently. Only then can you operate with minimal resistance. Here’s five steps that put you closer to the desired goal.
Be a Risk Manager First, Trader Second
Trading binary options and any other financial market today involves capital risk. There’s no way to completely avoid risk of capital losses. Prioritize the protection of limited capital over potential profits, especially if the trade setup is low-probability. Simple risk management techniques you can try include, but not limited to, opening positions that are anticipated for long-term price movements, reducing position sizes during highly volatile times during the day, and setting a hard stop loss on assumed positions. It’s much harder to manage risk than to make money, yet in the long-term, risk management is actually more important than anything else.
Learn the Lingo
Binary options have two unique terminologies used – strike price and expiry date. You won’t find these terms being used in stocks or spot forex trades. Knowing the commonly used terms in the options market puts you at a more advantageous position to make sound investment decisions. Strike price basically refers to the price level that a binary options contract must be above or below in before the said contract expires. An expiry date can be denoted differently from one contract to the next. You’ll find some contracts that expire within an hour while others expire within a year. Other terms you’ll need to drill down on are Calls and Puts, which are basically the order types you will be trading with.
Have the Right Tools Behind You
When it comes to trading, a must-have tool is your trading platform. It’s the easiest, most convenient, and most complete way to view financial assets and their respective prices. Having a reliable trading platform like UltraTrade enables you to participate in real-time price action with the lowest possible latency. Anyone who’s traded before knows the importance of fast order execution. You’d want to maximize the potential profit on a trade by entering and exiting at pre-planned price levels, a right that is only possible if you are working with a good broker and trading platform.
Take Care of Your Mind
If capital is the lifeblood of your trading career, brainpower is the guiding force that ensures you are directing all available resources to achieve the desired goal. Being in the correct frame of thinking is paramount to making low-risk, high-probability trade decisions. It also affects how quickly you can react to curveballs thrown at you on a regular basis by the options market. Avoid trading if you are intoxicated, physically ill, or is bothered by news you recently received. While you may be worrying about the missed trade opportunities during this downtime, think of it as a risk management technique for protecting your capital.
Focus on a Strategy
The final but equally important step for trading success in binary options is to have a strategy. A highly-detailed strategy will serve as the backbone and blueprint for day-to-day operations. It will tell you when and where to enter and exit without the constant need to manually work it out for yourself. Regardless of the strategy you choose to trade with, keep in mind that having a strategy will not exempt you from normal capital losses. A strategy is only designed to give you a systematic and non-chaotic means of extracting profit from the market consistently. A simple strategy involves buying a Calls option when the underlying asset price is trending for at least three days, being careful to enter only when price has retracted or corrected from its long-term course. If price is in a downtrend, buy a Puts option to profit from the selloff.
Final Notes For the Aspiring Pro Trader
Trading success can be achieved once the five aforementioned elements are congruent with the end goal in mind. Be proactive in strengthening each of these elements and you’ll find yourself making consistent returns. Though the returns may be of nominal amount at first, a steadily increasing account balance will enable you to open larger position sizes thereby amplifying potential returns per trade.