In the market, the majority of traders (about 90%) lose money, and this statistics can easily be applied not only to beginners in binary options trading, but also to experienced traders. Of course, if we talk about professionals, their losses are limited to short-term losses thanks to competent risk management and money management . And if their accounts do not make a profit, then at least they remain “with their own”. If we consider the trading of beginners, then most of them not only receive losses, but “lose” their entire deposit, and there are specific reasons for this.
Losing your deposit on binary options - the main reasons
There may be one or several reasons why the deposit is lost. But for beginners, most often there are at least three reasons from the list below:
- attitude towards trading as a way to get rich quick;
- lack of basic knowledge and experience;
- lack of trading strategy for binary options ;
- neglect of trading psychology and lack of a clear action plan;
- neglect of risks.
Attitude to trading as a way to get rich quick
It is for this reason that most beginners come to trading. On the Internet you can find many articles, recommendations, reviews and videos about how you can earn thousands of dollars on the stock exchange in a day or in a few hours, just by clicking on the Call or Put buttons. But the reality is that without basic knowledge about trading and lack of understanding of the psychology of trading, 99% of beginners lose their deposit on binary options. Therefore, all novice traders should understand that the market is not a place where you can quickly and easily get rich, and the pursuit of profit will always only lead to losses.
Lack of basic knowledge and experience
Knowledge in the market does not play a primary role, since trading consists of a complex of various skills, but a complete lack of understanding of this business also does not lead to anything good.
Before starting trading on a real account, a beginner needs to read not only articles about binary options , but also at least a few books on trading , which will give an understanding of how the market works and what is needed in order to make a profit. You can also get training in binary options trading .
After this, gaining experience is a must. The first and easiest experience can be gained by trading on a demo account . Such binary options trading will give:
- the opportunity to master one or more trading platforms ;
- understanding how markets move and what a trader can expect in real trading;
- understanding what graphs are and how to analyze them;
- understanding how indicators work and what other trading methods exist;
- understanding what you should pay attention to and what knowledge you still need to gain.
This approach will allow you to see the trader’s weaknesses without losing real money.
Lack of trading strategy for binary options
Unsystematic trading can also be considered a common reason for losing a deposit on binary options. The lack of a trading strategy always leads to the fact that all transactions are made randomly and the trader cannot explain why a Call option with an expiration of 5 minutes was bought here, and a Put option with an expiration of 3 hours was bought here.
Therefore, it is important to understand what strategy will be used to trade, and for this it is worth deciding what trading style to use. Trade can be divided into:
- Short-term (intraday trading, scalping ).
- Medium-term (swing trading).
- Long-term (investment).
The choice of trading style depends on the trader’s goals, but beginners should not start trading with scalping, since this approach requires experience, as well as strong resistance to stress due to the huge number of transactions.
After choosing a style, you can decide on a strategy, which must be tested on a demo account and possibly modified. Also, if you understand how any indicators work, you can create your own strategy.
Neglect of trading psychology and lack of a clear action plan
Most traders consider trading psychology to be useless and almost never pay attention to this rather important part of the foundation on which successful binary options trading is built.
Speaking about specific moments of the influence of psychology on trading, we can note emotions, on which a lot depends not only in life, but also in trading. Also, psychological factors that prevent profitable trading include:
- irresponsibility;
- greed;
- desire to recoup after receiving a loss;
- anger at the market;
- the desire to prove that one is right.
These are the most common negative factors (although not all) that affect the loss of a deposit on binary options.
We can discuss each of the reasons at length, but they are all caused by the lack of clear trading rules that should always be followed. If the trader adheres to clear rules, which, for example, imply always using an expiration of 5 or 10 candles in the trading system, and this approach is tested and verified, then there is no fear of losing the deposit on binary options, but as soon as the trader is overcome by greed and the desire for a quick making a profit, he will start using expiration in 1 candle, or even worse, in 30 seconds, and then in most cases a loss will be incurred or the entire deposit will be lost. Therefore, it is very important for every trader to have clear trading rules and always adhere to them, regardless of the circumstances on the market.
Neglecting risks
This point is one of the most important, although it is the last in this article.
Due to the lack of knowledge and experience, beginners in binary options trading have the impression that the more money is used in one transaction, the greater the profit will be, and this is true, but, unfortunately, they do not take into account that with this approach the deposit can be to lose in just a few trades, and therefore risk and capital management are often neglected.
To avoid large and quick losses, you should definitely study the basics of money management and risk management, since thanks to their competent implementation, even the most unprofitable trading system will help you not lose your entire deposit on binary options due to clear rules and restrictions when making transactions. In short, the risk per transaction should never exceed 2-3% of the entire deposit.
How not to lose your deposit on binary options?
If you summarize all the information described above, you can get the following list of rules, adhering to which you will be able to save and not lose your deposit on binary options:
- Trading is not a way to get rich quick, but an opportunity to start earning additional income.
- To successfully trade binary options, you must obtain at least basic knowledge and trading experience.
- Profitable trading involves using a proven binary options strategy.
- It is important to take emotions out of trading by following a clear plan and rules.
- Proper trading involves competent risk and capital management.
Conclusion
As it now becomes clear, losing a deposit depends on many factors, but most often these are emotions, lack of trading rules and neglect of risks. Therefore, it is worth excluding greed, haste and the pursuit of profit, since trading is a business that requires a serious approach and does not tolerate irresponsible attitudes.
See also:
Current bonuses and promotional codes
Technical analysis in binary options trading
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