7 Things All Forms of Trading Have in Common
Many investors decide to start binary options trading because the entry barriers are low and it is easy to understand. Binary options trading may well be the first type of investment you have ever made on your own without simply entrusting your money to another person. Or perhaps you have tried another type of trading in the past, and found it too expensive or complicated.
People trade binary options because:
- Low initial investment to begin – You can start with a couple hundred dollars.
- Easy. Binaries are easy to trade. They aren’t so easy to win consistently though.
- Fast. 30 minutes, 15 minutes, 10, 5, even 1 minute options down to 30 second trades.
- Entertaining. It’s a quick way to make a buck if you win the trade. Similar to the rush of a game of poker, or a session at the blackjack table
Binary Trading vs Other Types of Trading (FOREX/ CFD’ / PENNY STOCKS)
One of the coolest things about trading is that once you learn one type of trading, you can often diversify into different markets. As a binary options trader, you are picking up skills that you can translate easily into any number of other investment fields.
Binary options trades are easy to execute, so you don’t get caught up in the complexities of using your platform. You just get to focus on learning technique. After you have been trading for a while, you may build up enough money in your account that the entry barriers for other types of trading no longer seem so insurmountable.
Whether you are trading binary options, CFDs, Forex, stocks, or something else, here are 7 things that all forms of trading have in common.
All trading activities entail an element of risk.
There is a reason that many trading websites for binary options or Forex include a risk disclaimer either on the bottom of the page or on some “About” page. Any form of investment carries a degree of uncertainty. There are never any guarantees that you will be successful, and without an edge, it is pretty much a guarantee you will not be. The risky nature of investing is what creates so many commonalities across the board.
Why should you find that encouraging? Once you have learned how to navigate the treacherous seas of risk with one type of investment, you should have what it takes to survive in other dangerous waters! The fundamentals of survival are the same. You just have to learn how to adjust them for different market conditions.
No matter what you trade, you need a trading method.
One of those fundamentals is the need for a trading strategy. Your method or system is your edge. It is the compass you navigate by. And here is some really exciting news—the same compass that works in one ocean often works fine in another! The system you have developed for trading binary options may also work great for trading Forex or CFDs. It may simply need a few adjustments to compensate for the differences in how trading works on another platform with different mechanics in place.
No matter what you trade, you need a money management plan.
This is another fundamental that is the same in any business of risk. If you go off on a high-seas adventure, you do not want to eat through all your food and drink through all your water in a day. Even if you expect to get to your destination in time, what if you hit a squall? What if you get stuck in the doldrums?
This can happen to you while you are trading too. You never know when you will either hit a dead period or a string of losses. Sometimes you will go weeks or even longer without spotting an ideal trade setup. Other times you may place bad trade after bad trade, and may not even understand why you are losing money.
You need to be able to weather those difficult times, and that means rationing your trading account. Only trade a small percentage at any time (I recommend around 2.5%). This same plan that works great for binary options can also be used for any form of trading.
It is a good rule for sports betting and gambling at online casinos too!
Any type of trading can turn into irresponsible gambling if you go about it the wrong way.
One of the biggest risks that goes with any type of trading is actually the risk of losing control. You may have heard people say “binary options trading is a scam.” You may also have heard them say “Forex is a scam” too. The only reason you likely have never heard someone say “The stock market is a scam” is the obvious reason that it is simply the most well-known market. Most people know that the stock market plays a vital role in the world economy. What they do not realize is that is true for the foreign exchange market and others as well.
Trading is not a scam in itself (others may argue that point), but you can end up scamming yourself if you trade irresponsibly. Most people who believe trading is a scam have either done this to themselves or know someone else who has. As a result, they learn to associate investing with gambling instead of with making a smart, profitable, reliable living.
These are always cautionary tales. You should never let someone else’s mistakes talk you out of trading, but you must always remember not to repeat their mistakes. This is one reason that trading psychology is so important. Being disciplined can prevent you from falling into the trap of gambling. So can your money management plan. This is true across the board with any form of investment.
Any form of trading can help you earn a living reliably and consistently if you do it the right way.
While most people are more familiar with stories of failure than stories of success, there are people who succeed at all forms of trading, and make enough money doing it to make a living. You can make a living from binary options trading, and you can make a living from Forex. Once you have mastered binary options trading and are making a reliable, steady living from it, you can expand into other markets with the skills you have learned. This is a wonderful way to make even more money.
All forms of trading require adaptability.
Another rule that applies to all markets is that all markets change. Conditions will remain the same only so long. In fact, minute changes are happening every minute of every day. Those are the exact changes that 60 Second traders profit off of. Larger changes are taking place on larger timeframes. Markets rise and fall. Sometimes there are extended periods with no changes, and other times there is choppiness and unpredictability. And sometimes even the nature of those patterns subtly shifts. If you are not ready for it, it can take you by surprise, and you can lose a lot of money before you catch up to what is going on.
That is why adaptability is a key trait for any trader. As a binary options trader, it is one of the skills that will help you to succeed, especially over the long run. It is a skill you can take with you if you decide to try out other types of trading. Perhaps the best thing about this is that just knowing how to adapt can make it easier to transition to new markets! Once you can understand how to adjust to changes in your own market, you can take those same principles and apply them to the new conditions you encounter in markets you have never traded in before.
With any form of trading, you have to have the right mindset for success.
For a lot of binary options traders, the hardest thing to learn is not a trading strategy or a money management plan, or even how the market works. It is learning how to cultivate a mindset conducive to success. All of us struggle with various forms of negativity. We all have hurdles we have to overcome. Maybe you have a pessimistic mindset, or perhaps you have trouble staying focused and on-task. Perhaps you are not a “self-starter.” Maybe you get distracted or discouraged easily.
To succeed as a binary options trader, you need to learn how to be a realistic optimist. You have to develop self-discipline and perseverance, and learn how to be confident without becoming conceited. You need to look at yourself clearly and see honestly what your strengths and weaknesses are. While this is hard work, once you have done it, you will have the right mindset to succeed in any market!
There is no reason you cannot trade binary options forever without ever branching out into another market. If you start doing well, though, you may feel a desire to diversify your holdings. There are so many ways you can make money trading, and once you have cultivated the basic skill set, you can apply it everywhere.