Tips for successful options trading

Tips for successful options trading

The popularity of digital options trading is growing constantly. The main reason behind it is its simplicity. Trading options is far less complicated than traditional ways of trading like for example forex. The other reason why so many people have joined digital options markets is the opportunity of making big money in a very short time. But the catch is, you can easily make money and you can easily lose them as well. Without fair preparations, knowledge and attitude, there is no success even in digital options trading.

In this article, you will read about the things you can do to increase your chances of success. They will not guarantee success, though. You should take them into consideration, then read a little more about trading and then practice. Practice will train your skills and strengthen emotional control.

I believe the following 10 tips I have for you will help in paving your path to success in digital options trading. Let’s get started.

Confine the expectations

A loss would hurt more when your expectations were too high. And I do not want to say you will lose. But what if? You have to be ready for different scenarios. Meanwhile, many new traders are joining the online platforms to trade digital options in hope for fast and easy money. When this is not happening, they get frustrated and emotions start to cloud their judgment. This is a short path to failure.

Trading expectations

Trading expectations

An interesting fact is that the first investors who turned in the direction of digital options were previously playing poker online. They were attracted by another online gambling facility, but soon they found out the rules are a bit different. They had to go ‘all in’ with every order. They had no possibility to improve their chances by expelling other players from the table. The winning rates looked good at first glance, but in reality, they were very much in favour of House. Some brokers give more than 80% payouts, but if you look closely, it is only for certain assets and not at all times. With the average payout at a level of 70%, you might still have to get 60% of winning transactions just to achieve viability. With the average payout 80%, your odds will be comparable to traditional forex trading which has ’55/45′ split including commissions and losses. You aim to shift the odds in your favour so you win at the end of the day.

Be smart when choosing a broker

Digital options’ popularity resulted in opening multiple online platforms. With both, beginners and professionals rushing towards digital options markets, brokers had started to race for the best deals, payout ratios, number of financial instruments or the indicators available on their platforms. Competition as a consequence is huge but also, sadly, there is a field for fraudulent brokers to operate. You have to be careful and choose the broker wisely. Do not trust every promise they make, read the comments and opinions written by other traders. Take your time when choosing the right broker as you do not want to end up with a crook.

You may be interested in reading the article on how to avoid fraudulent brokers.

Start small

So you have chosen a trusted broker, you have learned a lot about trading digital options and you want to try your skills in real trading. And here the problem begins. Because investing real money influences your brain and your nervous system is on high alert. This is why it is very reasonable to start small, to invest the amount that you are ready to lose, the amount which if lost, will not make you a bankrupt.

It happens often that beginners are losing money and some brokers make use of this piece of information. They build aggressive campaigns and offer attractive bonuses. But they are expecting that 70% of newcomers will fail so they will get their bonuses together with the deposits.

Do not be tempted by the offers that sound too good to be true. There is always some kind of a trick there. Instead, invest a small amount first, have patience and slowly build your confidence. Little by little, you will get better at trading and you will be able to increase the trading amount and the profits.

Have a good knowledge of Technical Analysis

The one thing all the markets have in common is their unpredictability. Even the professionals cannot tell with 100% certainty what will happen in the near, nor further future. But to come closer to this 100%, you will need to know Technical Analysis. If this tool has some deficiencies on the platform you are using, you may need the MT4 forex platform for some extra assistance.

As a trader you need to know technical analysis

As a trader, you need to know technical analysis

You will also need to learn about candles formations and repeatable patterns. They are of great help in TA. Thanks to them you will be able to predict future price movements with high probability.

You may also want to check the calendar of scheduled events that could influence the price of the particular instrument. This is especially important when you are trading short timeframes.

Stay focused

Sometimes it is not easy to stay focused. There are so many options to choose from. Starting with selecting a good broker, then the best financial instrument and so on and on. You may be offered Boundary, One-Touch, Ladder or other types of options in addition to the standard ‘Put/Call’.

Stay focused, do not get distracted by the multitude of possibilities. Stick to the traditional ‘Put/Call’ options type until you will truly familiarize yourself with other ones. Stick to the assets that you know well and trade them in times of high activity on the market so the liquidity issues will not affect valuations too much. And stay with the trend, wait for it to gain the strength so the chances of winning will be better.

Apply a good money management

In digital options trading, the risk is fixed at the time of order execution and limited to the amount of your investment. Still, it is very reasonable to use a money management system. It will ensure you are not left with no money for the next day of trading.

If you have, for example, $1,000 in your account, and you play conservative, you should invest around $20 in a single trade, that is 2% of your account balance. If you prefer a bit more aggressive style, invest between 5 and 10% of the total amount you have on the account which, in our case, will be no more than $100.

Such rules are invented to protect your money. Long losing streaks are happening even to the traders with a great experience. This is why it is not advisable to increase significantly the investment amount just to recover previous losses.

You may, naturally, increase slowly the investment amount if you are doing well, but avoid ‘Double-Up’ on a losing trade or ‘Sell Early’ on a winning trade with momentum.

Create a trading strategy

There is a saying among the veterans that ‘if you fail to develop a trading plan, you are planning to fail’. We are only humans and emotions are present also in trading. When you experience loss, especially if it was a big one, you begin to feel disappointment, frustration and anger. And emotions are the worst advisors in trading. This is why it is so important that you create a trading strategy and you stick to it. Whenever you feel like you are losing control, just take a step back, check your trading plan and continue with a clear mind.

In order to succeed you need to have and follow the strategy

In order to succeed you need to have and follow the strategy

Creating a trading strategy is not that difficult because you do not have to do all by yourself. There are plenty of ready strategies you can find. Choose one or two, try them on and make some adjustments so they suit you better. Then just follow them.

Use caution with Correlating Assets

In traditional trading, the number of open positions simultaneously should not exceed three. But in digital options, the risk of losing is fixed for every order. Thus, you can increase the number of transactions that you keep open at the same time. Make sure though, that your trades will not end up after the market closes. You want to stay assured that you are diversified with no correlation acting against your goals.

Look for a signal provider with a good reputation

This does not matter so much if you just trade for fun if trading is more of a hobby than a profession. But if you are taking this seriously, it might be a good idea to invest in the service that offers you signals of good entry points. But you must look for a provider with an excellent reputation. Many software robot providers are not legitimate at all. The reliable ones are based on tested software algorithms. Thus, make your research and choose well.

Avoid the brokers who want you to deposit money so they can trade for you. This is a scam where you only be depositing more in hope of the profit, but the broker will lose trade after the trade and he will seize your money.

Practice

The practice is the best teacher. You may read a lot, listen to the experts, but if you do not make it all your experience, you will not succeed. Take advantage of the demo accounts offered by so many. These accounts are supplied with virtual cash so you do not risk your own money. Use them with every new technique, indicator or strategy. Because the best way to learn anything is through practice. Trading is no different in that matter.

Practice to be options trading ninja

Practice to be options trading ninja

I am sure trading digital options will be even easier with the above guidelines. If you know any other tips you would like to share with us, present them in the comments section below. If you feel like reading more about digital options, you are more than welcome to review the articles from our Binary options guides library.

Enjoy trading options!