Trading psychology: How to control your emotions when trading binary options?
Trading requires nerves of steel and control of your emotions. In fact, when you place a position, human nature is such that we trade primarily based upon emotions. Mixed emotions can surface, such as happiness and fear, during trading operations, so when a position proves to be a loser, there can be feelings of fear and anxiety combined with a feeling of powerlessness. This may result in the inability to recoup positions on an underlying asset.
The accrual of losses and profits can be a delicate phase to handle: When losses accumulate, anxiety can take over. This can lead to irrational decision-making such as starting the process over, hoping to regain profits. However, it is in this phase when mistakes multiply and panic then takes over fear.
When losses accrue, anxiety takes over fear and this leads to irrational choices because we want to quickly win back our losses at any cost. It is generally at this time of panic when we repeat our mistakes.
On the other hand, when profits build and capital increases, happiness and excitement can overcome us and cause us to be overconfident and want more. This can lead to placing other positions to make more significant objectives: This can be very dangerous when the binary options trader feels that they fully understand the markets, and this phase of euphoria can be followed by delusion if one or two poor positions result in all the capital going up in smoke.
Take a step back: It is important to take a step back before placing your position, as it is important to identify your personality’s strengths and weaknesses such as how you make decisions and especially to determine when your emotions surface during trading. This introspective will enable you to earn the most profit and to use your emotions as pre-indicators.
Technical and graphical analysis are important tools to use to be aware of decisions which prove to have differing results than previously thought. In fact, choices can end up being irrational and you can place a position impulsively, or not. Different tools enable you to make more rational decisions (like money management) and to avoid being overwhelmed by emotions. For example, you can suddenly modify a stop loss as an emotional response hoping that a trend will revert, because seeing a position lose leads to an irrational decision: To avoid doing so, always take a step back before placing a position !
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