When you come to think about it, trading is going on all around the world 24 hours a day. The Asian markets are already open while some Americans only go to sleep. When they wake up, the Europeans are already half way through the day. There’s so much trading going on, no individual has the ability to keep tracking all this phenomenal activity. While some gifted individuals adopted trading as a full time profession, most of us only trade in our spare time. When these traders go to work early in the morning they trade, that’s what they’re hired for, that’s their life. They are well qualified to the trading job, which includes responding to various events simultaneously, and they react according to these changes under pressure. Most newbies I know always brag on how they could’ve been much better traders then the ones doing it as a profession, they are smart people indeed and I truly believe them, nevertheless, they seem to complain too often about their silly mistakes. They can open their trading week in a storm, but then lose it all later. They’re always performing the right actions, but suddenly they fall. They turned to Binary Options trading because they are no less good traders, they have the potential and they show it, it’s just that in the long run – professionals stay on top.
What is Time management in trading
Time Management is the key. Better and more efficient time management could eventually turn losses to profits, turning sloppy traders into consistence performers. When time is limited, the only possibility is to make their trading more effective. Just like farmers use better fertilizers and more modern agricultural methods on their crops to increase production, we could make our trading hours more effective by managing it better. Also, another positive side effect of setting up specific trading hours is limiting the variety of assets being traded which eventually should turn into you specializing on certain assets, hence better decisions by the trader. To conclude, time managing is no less important than any other aspect of trading, if not more important. Manage your time right, make better decisions.
Why Time Management needed in Trading
Time was never in our favor, neither is it when it comes to trading. When a full time trader who lives in London goes to work, the Asian markets are already half day finished. After his lunch, the American markets open up. He has the whole day to monitor worldwide events, and to use this information to enhance his trading. On the other hand, when an American part time trader finish his daily job at 5pm, the Asian markets are almost closed. Europeans are getting ready to close and the American markets have a few hours remaining. These time differences limit his trading time frames and therefore limit his resources. That’s the point where the proportion between expectations and resources lean towards the expectations side, causing much disappointment for newbie traders. Unfortunately for us part time traders, we cannot create time, we must make the most of the time we have. How do you do that? Simple. By adopting habits and methods, creating natural instincts for a limited time frame and setting the expectations to correctly match our resources.
Trading as a Hobby Vs Trading for Living
There’s a big different between what we do as a hobby and what we do for a living. The lucky ones among us are those who work doing what we like, most of us would just have to keep doing their hobbies on the evening or on weekends. Unfortunately for us traders, there’s no trading on the weekend, so all the time we have for trading is early morning or on evenings, some of us even wait until late night to trade. Professional traders, when they wake up, start trading and keep trading until the day is done. Then they trade again. They trade out of instinct, just like a doctor treats a patient or a chef makes his dish. We part time traders only have a certain limited time-frame to try and fulfill our dreams of getting rich, yet it seems like we try too hard. Instead of generating profits in our spare time, lots of newbie/ part time traders suffer losses. It’s not the quality or potential of the new trader, it’s the uneven equation between expectations (=profits) and resources (=time). I decided to exclude money in the resources side since I don’t see any real difference between the money available for full time traders and part timers. The major difference between those two types of traders is time. We don’t have as much time to trade as the full time traders do.
Part Time Traders VS Professional Traders
Let’s think about the similarities between us – part time traders, and the professional traders who do trading for a living. For this discussion, let’s assume that unemployed individuals who trade for a living, but not as certified professional traders, are professional traders. Just for the record, I would like to add that I don’t believe any person who has a regular job should quit his job to become a full time trader. Too many people actually ask me that question; “Should I quit my job?” “Can I make a living out of binary options trading?” etc. This is driving me crazy. If the question even pops out, you’re not ready for it. If you know the answer, I won’t be the one to stop you, neither to pick you up if you fall. Back to similarities. We are all good traders in potential, we are all smart people, and we could all succeed. That is the reason why we are trading. But that doesn’t make us professional traders. We could all learn trading, from tools to strategies, practice all day and finally get used to it. We all understand basic events and their effects on the markets; we can all handle the pressure. Yet, that’s not full time trading. The most basic difference between a full time professional trader and a part time/newbie trader is that the professional does it for living. If his trades are off track, he could lose his job. We part-timers might be losing some extra cash, we might lose and forget about upgrading our second hand car or go out only 2 times this week, but our lives would keep on going. If you’re a part time trader and you’re trading with your rent money, you’re in the wrong business mate. Stop now before you lose it all.
Time management Trading rules
Maintain a Schedule for trading
You have to setup yourself specific time in your day which will be dedicated to trading binary options. To establish a good time you need to take in considertaion many things. This is something you need to think about for yourself. For example, if you are an european trader, at noon you can trade on asian market aswell on US market. But when you are doing it, be focused and do that only. Specialize yourself for one market and few trading assets. You also have to make sure that you do all important other tasks you had in mind for the day before or after the trading zone and you can consider trading as one of them.
- Setting Trading Hours – and only your free time could become your trading time. Trading demands focus, especially when trading in short time frames. You can’t help your child with their homework’s while trading. That will be gambling. Ask yourself: what time do I finish work? What do I usually do after? Don’t just delay other tasks because you want to trade. Consider trading as a task, a daily after work job. If you say “I’ll trade between 8pm-11pm” than those hours will be your trading hours. Don’t do anything else expect trading while trading; make sure to complete your other tasks before and after trading time. Consistency is key
- Global but Local – A trader from Europe can trade at noon, both on the U.S markets and Asian. A Japanese trader, can only trade on the American markets at night time. So wherever you’re based, you need to understand that you cannot trade on all markets all day. You must focus on markets working on your trading hours; limit yourself for a few assets and indices available to trade on your trading hours. Specialize on these markets. Market opening/closing on your trading times could provide great opportunities.
Continue Trading on daily basis
After you have set up a trading time that will fit you you also have to stick to it, be consistent is the next rule. Try to always trade between the chosen hours so it is turned into routine. Other tasks or new tasks that came in during day should be taken care of before or after the specified trading hours. Make sure of that and you will be better off. These small things can keep you on the right way because trading is not a hobby.
Set a limit to your trading
The most important rule of any real trader is setting trading limits, both for profits and losses. One common mistake done by newbies is to underestimate the market, losing more than you wanted or losing after winning streak. When on losing streak, beginners tend to believe that their luck would change at a certain point; therefore they should keep on trading to make up for their losses. The same for winning streaks – if I’m on a roll, then maybe I should keep on trading. Then you lose, and lose some more after trying to gain back your used-to-be-profits. There is a simple solution to this disease – setting goals for profits and limits for losing. Your goals should fit you trading level of course – if you’re a newbie, set a daily goal of 1-4% profits (% of the user’s account total value). When you’ve reached your goal, stop trading. Call it a day, look for something else to do, maybe some exercise. A 1% daily profit (5 days a week) equals 5% weekly profits, which sums to a yield of 22% per month. Pretty good for 1% a day isn’t it? If you had invested 500$, within a month you’ll gain a profit of 110$. 5% daily, for example, is a 165% yield in just one month.
Another important rule of trading limits – never continue trading after your trading hours have passed. If you plan to trade between 8-11, stop at eleven, no matter what’s your position. You might not notice it in your everyday life, but our body and brain adapt to our habits. Some of us are hungry at noon, tired at night or full of energy at morning, that’s just our bio system. When we trade on specific hours every day, our brain and body would adjust themselves to the situation, allowing us more efficiency and concentration while trading. When the time is up, we might not notice it immediately, but our body functions would decline, causing us stupid mistakes and losses.
Every trading day should stand by itself. If you’ve lost yesterday, don’t try to regain your losses today. Keep up with your plans, if your goal is 5% daily, reach 5% than stop. Even if you’ve already lost 4 days in a raw, stick to your limits. When the end month comes, calculate your losses and profits and think of a new trading plan. For example, I know a few traders that increase the losses limit (say from 5% to 6% loss) after achieving their monthly goals. This allows them another 1% trading volume, better chance to regain their losses. No matter what your trading plan is, stick by it. Change your trading plan only after a few months trading.
Don’t be lazy! Take it as a game
Did you think you will be lazy and trade binary options and get rich. Well you have to keep your mind fresh and active and that means daily exercise. Do what you like to do, go running or swimming or just go to a walk or fitness. This way you will feel more energized and more focuse and relaxed while trading.
Always prepare before trading
Before you dive into your computer, exercise a little, pump some blood into brain. I usually stretch and make some pushups, some people go for a run, some by a punching bag, and others lift weight. Whatever you’ve got to do to make your blood flow, do it. It’s important to be 100% focused before trading, good fitness could help a lot. 5-15 minutes of exercise before trading is all you need, so make sure to include it in your trading hour’s schedule.
Make your trading style Specialized
We all have problems with time, it is just not enough off it. So we have to make sure that we maximize the hours we have. Therefore we can not trade everything and it is better that when we trade, that we trade good. That is why it is better to specialize to assets that are available for trading during your choosen trading hours and definitely focus on them and win.
Follow your trading plans
Let’s say you’ve decided to trade between 18-21. Whatever the tasks you have, you must not let interfere with your trading hours. Finish every task before or after trading hours. When you have a new assignment, something that came by surprise, try and do it on your off trading hours. No matter what it is, unless it’s something really important which has be done immediately, don’t let it interfere with your trading hours. Your trading hours are no less important than your working hours. Trading is working, a profession, not just a hobby.
Think of next day’s work
Have your limits, when it comes to losses and profits as well. You can setup yourself if you win a certain percentage per day you end trading because otherwise it can turn around against you and you start losing. Same applies to losing, after certain amount of losses you should stop trading and go out and start again the next day when you are fresh again and focused. You definitely should not try to make up money from yesterdays losses. It does not work like that and can only lead to even more losing trades. Stick to your plan and when your trading hours are over, finish and go to sleep or watch tv so you do not make mistakes.
Binary Option High School
All Lessons in Part 3: Risk Management
Lesson 1: Time management in binary option trading
Lesson 2: Risk Management in Binary option trading
Lesson 3: Binary Option Charts and Analysis
Lesson 4: Managed Binary Options Accounts