By Tim Lanoue
Whether you are newbie or veteran online trader, if you lack the proper mindset when investing online from home, you are ultimately setting yourself up for failure. Keeping your emotions in tact and your decisions rational is much easier said than done if truth be told. The aim of this educational article is to educate both Forex and binary option investors on the importance of trading psychology and how detrimental it can be to your investing endeavors, if you begin to invest irrationally and without reason. To learn how to master your emotions and increase your potential of success as an online trader, I encourage you to keep reading.
Characteristics of an Investors Brain
Understanding the functionality of the human brain is a marvelous and complex subject of discussion that is still under discovery. It is a widely known fact that our brains are divided into two separate hemispheres. The left hemisphere of the brain is responsible for analytical operations such as logic, science and mathematics. The right hemisphere on the other hand is responsible for creativity, arts and emotions. Since investing should be performed in a more analytical and rational approach, we will be focusing more upon developing the left hemisphere of our brain.
Psychology and user-experience informs us that if we encounter problems that don’t yield systematic answers, it becomes difficult for us to remain calm and focus on analytical solutions. When these situations occur (which happens several times throughout any given day), it becomes evident that we are affected emotionally, which leads us to making less systemic and logical decisions. When this occurs during investing, it is evident that we are deviating from using the analytical side of our brain which can have dire consequences.
One common example that many of you can probably relate to would be being concerned about the loss status bar when you have an investment underway. Oftentimes for newbie or more sensitive traders, the loss status bar can be your worst enemy, which can result in you chasing trades, doubling up trades or making irrational decisions due to not controlling your emotions. Learning how to control your emotions and treat your investing like a business is ultimately what you need to do to survive in binary options and Forex trading.
How To Control Your Emotions
The most difficult task that you will undergo when taking on the financial markets would be learning how to beat and control your emotions. Changing human nature and learning to take a step back from your endeavors is a difficult task even for the most veteran investors. Learning how to treat your trading as a business rather than just an experiment will not only work wonders but will play a considerable role in determining whether your not you generate consistent and substantial investment profits.
Simple methods that you can do to help you control your emotions would be learning how to avoid the loss status meter. Whenever you execute an investment, let the trade run its course, there is no reason to stress out and make less rational decisions just because your trade may not be going the way you want it to. This is where user-error and clouded decisions will flutter into the mind, don’t allow yourself to fall victim to yourself when trading! Beating the financial markets is already a difficult task to achieve, don’t make it an impossible task to accomplish by making yourself your own worst enemy! Leave the room, put your phone down, do whatever you need to do and just avoid the investment meter if you need too!
Accepting losses can be as difficult as mastering your emotions if truth be told. Whether you are investing with binary options or Forex, there is much liquidity and margins for profits so the ability to make up for your loss investments is not as difficult as it may seem. Now, this doesn’t mean that you should double your next investment or chase losing trades but rather analyze what you have done incorrectly and do your best to remember it for the next trade. Keeping a log of your losses with picture examples is one of the quickest and most efficient ways to learn from your mistakes and make corrections. Remember, do your best to keep calm and treat investing like a business. You are less prone to make irrational decisions when treating this as a profession than just a hobby!
Greed Is Your Kryptonite
Greed is one of the most unfavorable characteristics an individual or an investor can possess. Unfortunately, it is programmed into our DNA and there is little to do but to accept it and learn from it. It is in our unique nature to naturally look for something more, to push a little harder to achieve a little bit more which isn’t a bad trait necessarily, but that is oftentimes when greed comes out to play.
Perhaps the best way you can combat greed and render it useless would be to apply a proper money management strategy. Learning how to manage your finances in an analytical and professional manner will not only work wonders when your trading, but also act as a safe guard against yourself and losing investment days. No matter which strategy, trading software or signal service you are using you will always suffer from losing investments and days from time-to-time.
When these unfortunate days occur, it is best to have a strict money management strategy set in stone to minimize your losses, don’t allow yourself to become your worst own enemy. Don’t allow greed and irrational decisions to cloud your judgement otherwise you are ultimately setting yourself up for failure.
Inheriting Qualities To Become A Better Trader
Becoming a better trader won’t happen overnight, it is a continuous and repetitive process. Just like with all walks of life, if you want to become good at something you have to work your tail off in order to reap the benefits. You have to be not only motivated but disciplined enough to work toward achieving your investment goals. If you are naturally sensitive, emotional or spontaneous, do your best to distance yourself from those feelings when investing.
When it comes to analyzing the traits of a profitable and consistent investor, some of the most common traits would be discipline, patience, acknowledgment of proper money management and immeasurable motivation. Just because you should treat online trading like a business doesn’t mean you don’t have to dislike your time when investing. Trading online with binary options and Forex creates such a rush of energy and emotions it is difficult to put into words. Feelings of excitement, eagerness, nervousness and motivation all flood your senses simultaneously. Learning how to enjoy these emotions but keep them at bay will play a crucial part in determining your success. Keep calm, stay focused and let the rest follow!
Avoid The Lemming Effect
The Lemming Effect is an unsubstantiated myth about Lemmings, which are small animals found near the Arctic. This myth can be best explained as an adopted metaphor for people who tend to go along unquestioningly with a group with unforeseen dangerous consequences. When applied in an investment scenario, this can accurately be described as an investor placing a trade based solely upon market sentiment. In other words, they are blindly going along with either the buyers or sellers of the market based upon a percentage.
Although a number of other binary option reviews sites endorse this style of investing, I believe falling victim to the Lemming Effect will only hurt your chances of success when investing. Not only are you blindly going with traders you have never met before, but if you are investing with an unregulated broker for some illogical reason, you can bet those values are manipulated. Which brings us to a very important subject of discussion, make sure you ONLY invest with regulated binary options and Forex brokers that are legal where you reside! If you tend to follow the crowd blindly, you are setting yourself up for failure when you should be doing everything in your power to avoid failure. Rely upon your intuition, don’t discredit yourself and control your emotions to ensure you have the proper attitude when trading online!
How To Set Yourself Up For Success
Formulating the perfect ingredients for successful online trading is less difficult after you learn to control and beat your emotions. Now that you have the proper mindset and know what steps you need to take to ensure you are reflecting the proper attitude, setting yourself up for success is much less difficult. If you are a newbie online trader and lack fundamental knowledge for investing, I would encourage you to visit OBO’s Educational Guide where you can learn investment fundamentals and trading strategies. The more knowledge you accumulate of investment principles, the better off you will be. Knowledge is power. Strive to learn a new subject every day or ever week if you can find the time.
Trading Psychology Tips from Michael Freeman
Before you get started with any online trading, it is imperative that you get started with a regulated online broker. It doesn’t matter if the investment broker is for binary options, Forex, or CFDs (contracts-for-difference), it is imperative that you only invest with regulated brokers that are legal where you reside. To learn more about reliable brokers, make sure to visit OBO’s Verified Brokers for binary options or Forex and sign up with only regulated brokers! Only after you have created an account with a regulated broker would I encourage you to visit the Proven Signal Services Guide to learn more about profitable trading software and signal services. Each of the signal services listed have proven to generate a success rate of 69% or higher and are highly reviewed by our subscribers and other binary option portals.
As most of you already know by now, if you have any questions or feedback to share, please feel free to provide them in a comment below. As most of our subscribers know by now, we are a fairly active community here, devoted to see one another succeed. Which is why the more feedback we receive, the more other traders and readers will benefit from your experience and knowledge.
If you are searching for a consistent and proven way to generate additional income through binary options or Forex trading, please check out our comprehensive OptionRobot Review or learn my version of Advanced Price Action Trading Strategy!