psychology and binary options

When we see the amount of binary brokers that exist in the world it is obvious that there must be an incredible amount of traders who use them.

As it is logic, most of those accounts are of novice traders who obviously will end up losing all their money quite rapidly.

However, we should have a group quite large composed of veteran traders who open their accounts with the illusion of beating the market.

Those veteran traders may have been trading CFDs, Forex, stocks or futures before and probably lost most of their money. After that they think that perhaps it was their “psychology” that made them fail in this terrible world of financial markets.

In other words, they think that it is psychology that matters as many trading books claim.

After all, there are many books and authors who say it, that psychology is responsible of 80% of the success in trading, as if by following certain way of trading with enough discipline we could become a machine that beats the market.

Unfortunately this is not the case, and if you do not believe it you can ask the tens of thousands of developers of automated trading systems if they have found the way to beat the market despite of having totally unemotional ways of trading.

Binary options psychology

Not long time ago, talking to a known person, in one of those normally irrelevant street conversations the guy told me he had found the way to trade the Dow infallibly and that he was going to put it into practice in binary options.

The system was infallible because was about trading some supports and resistances when the market opened and supposedly the key were: psychology.

One of the magic solutions he found was the fact that he was not going to trade more than “x” times a day, supposedly.

After having the patience of listening of what he said I told him that no matter what strategy or psychology he used, he would not win in the binary options market whatsoever, at least not for the long-term.

Everybody can win after a month of trading.

Of course, this person did not listen to me. He barely let me speak four words. The man was really excited: he had found the way to riches.

Anyway, I told him that it would not work and I left.

Some days later I found this person again and did not look very happy.

I asked him about what happened.

He confessed me that he had lost 3,000 thousand dollars in one day, his entire binary options account.

The best of all, or the worst, depending on how we look at it, was the fact that what failed was psychology since it was after a couple of loses one day that he lost his mind and started trading many more times that day despite the fact that the system was supposed to not allow more than certain number of trades a day.

I told him that obviously trading impulsively was not a good idea, which goes against all kind of sensible trading.

However, I also told him that even though he traded in a “intelligent” and disciplined way, for example, only once or twice a day, he would still not be able to beat the binary options market.

The only difference is that instead of losing all his money in one day he would take several days or weeks to do that.

This is because the problem is another, which is: making consistent money trading binary options is very complicated to say the least.

And no, applying the right “trading psychology” will not work either.

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