How do I Know When to Quit My Binary Options Strategy?
It is easy for traders to get stuck in a rut. Sometimes it is simple burn out but sometimes there is a deeper, more sinister cause…a bad strategy. How do you know if your strategy is bad and if it is, how do you fix it?
Stuck in a rut? Having a hard time breaking yourself out of a losing streak? These are unfortunate but not uncommon problems experienced by traders of all varieties. Sometimes it is nothing more than an unavoidable string of losses, something that every great trader experiences. Sometimes all you need is to take a break and get some fresh air but sometimes it is much more than that. Sometimes a string of losses or a trading rut can be a symptom of an underlying problem. How do you know the difference and what do you do about it if you do? Discovering the source of a trading problem can be very hard. Traders are, by nature, risk takers and there are a lot of factors involved with any trade. Here are some tips on how to recognize when you are in a rut and what to do about it.
Binary Options Can be Sold!
As you look at the various strike levels of a particular binary option, you’ll see the similarity to call options. As a binary buyer, you’re bullish about the underlying market. The binary at expiration is valued at $100 if underlying market finishes above the strike so the various strike levels will draw similarity to in the money, at the money and out of the money call options as to the relationship of the underlying to binary strike. The at the money binary will be priced around 50 and the pricing is limited to the trading range of zero to 100.
You will not find the binary option chain for the puts. To sell a binary you are taking the opposite view, you’re bearish the underlying market and think it will finish at or below the strike at expiration. So to sell a binary, you go short the binary at the trade price.
Identify the Problem to quit
This is usually a string of losses, or a prolonged string of losses to be exact. Every system is subject to losses, they come and go like the wind. There are bad binary options strategies, but there’s also bad traders. Managing losses is the key to long term profitability. If you have an uncontrolled, unusually long run, or too many losses to maintain account growth then you have a problem. As I said, this could be simple. Maybe getting a breath of fresh air, grabbing a beer with your pals or having dinner with the wife will help. It could be something more sinister so don’t be afraid to take a closer look at what you are doing.
Always Admit you have a Problem! Never Deny!
Isn’t that what “they” always say. The first step to solving a problem is admitting that you have one. It makes sense. You can’t fix what you don’t think is broken. This is different than tip number 1. Identifying that there is a problem is not the same as taking ownership of it. Once you take ownership then you can truly move on to discovering what it is and what to do about it. You can’t blame it on the news, or charts or the indicators. These are only tools. If you are losing on a regular basis, or if you are losing on a net basis over time, you have a problem and need to address it.
Make Adjustments if possible
Once you figure out where you are going wrong it is time to make adjustments to your strategy or system. This may mean starting from scratch but usually it just means that you need to sharpen your focus in some way. My logs from 2013 showed that I was not doing well trading puts. They also showed that my worst asset for the year was the EUR/USD. I know from memory that most of my trades on the pair were puts. What does this mean?My problem area for the year was trading the EUR/USD with puts so my adjustment naturally would be to stop trading puts on this pair until I have gotten a better understanding of the market.
Sell you position when needed
Whenever an in the money position is sold, it is sold for the purpose of locking in some profit. The purchase price offer should always be higher than the investment amount. The offer will vary, with a higher price being offered for positions that are deep in the money. Obviously, you’ll need to strongly consider selling such positions, as they stand a higher chance of providing you with a 100% payout. It is not uncommon for traders to sell a position and then see that it would have finished in the money.
Easier decision making comes when the asset price is volatile. Since these positions could go either way, you could choose to sell when the price moves into positive territory and exit the binary options trade with some profit. Some traders will even enter into trades having already planned to sell the position once it moves into the money. This is often referred to as scalping, and the practice is completely legal and not frowned upon within the industry. If you’d like to lock in smaller profit amounts and build your account funds in that manner, then selling is the ideal feature for you.
Selling a position while it is out of the money will be a stop-loss action of sorts. Doing so will prevent you from losing your entire investment amount on a trade that is not going as you’d hoped. Again, you’ll notice the purchase price offer varying along with where the price is positioned. A higher offer will come when the position is not deep out of the money, with a lower offer being presentedwhen the position is far from being profitable. Should a price trend that is opposite of your prediction be noted, selling is likely to be a wise move.
Sometime you need to take Some Rest!
Of course it is possible you are just burned out and need to take a break. Trading is not a physical task but the mental power it takes is very draining. I myself am plugged into the news just about 24/7 and that is not counting trading hours when my trade station is up and running. Needless to say my eyes get tired, my mind gets tired and I get cranky. Burn out is common to all professions and should not be ignored by binary traders. Sometimes you just need to take a step away, stretch real good and go outside for some fresh air. Or in my case, a ripping mountain bike ride with my buddies that pushes all thoughts of trading from my mind, or a nice night out to a new hipster bar with my girl. Regardless of the reason for your rut, it is very important to be able to recognize it and to have a way to get yourself out of it.
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Lesson 2: Binary Option Correlation Strategy
Lesson 3: When to quit or change your Binary option trading Strategy
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Lesson 5: Trend Binary Options Strategy
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