In life, the most important thing is to get control of yourself to have better things. This applies to other aspects too, not only to trading.
If you are going to look at it from a different perspective, having good self-control will determine your success or failure. And how do you maintain good self-control? It’s simple:
Don’t overtrade
Over-trading is one of the biggest mistakes a trader can commit when dealing with binary options and options trading.
If you struggle with trading discipline or feel you cannot control your impulse to trade no matter how many times you fail, here are some tips that might help.
These comprise strict pre-trade rules designed to prevent over trading, which trigger the need for trading signals.
Set daily targets and don’t exceed them
Although this seems obvious, you’d be surprised how many people do not think about it. Without an upper limit on investment amounts, traders can quickly lose control of their emotional state and start making less than ideal decisions.
Ultimately, they will suffer the consequences in terms of high financial loss rates. Just as importantly, use stop losses on every trade so that your positions are closed automatically when the price moves against your planned entry point.
The best stop loss values will be determined by the volatility of the currency pair you’re trading, but it’s good practice to ensure that stops are never too far away. They should act as an invisible hand on your investment money, which forces you to only trade when the odds are favourable.
Force yourself to take breaks
This is like not letting yourself exceed daily targets but with a greater emphasis on emotional discipline. Trading requires immense mental clarity, and staying focused for long periods can be extremely taxing on some people.
If you lose motivation or get distracted easily while trading, do not hesitate in taking regular breaks or switch off your screens when you feel like this might happen. You can leave your charts open and look at them later when you’re feeling refreshed.
Do not over-trade with an untested system.
Random trading (when no trading signals are involved) is gambling, and you should avoid it at all costs. Even if you feel like the current market conditions warrant active trading, only switch into manual mode once you’ve developed a high success rate with your programmed strategies.
If the RSI has been giving you positive trade signals for weeks on end, but the price hasn’t moved in your favour yet, there’s nothing wrong with leaving your money in the market and waiting for more profitable opportunities. Chasing losses by taking impulsive trades will cause unnecessary stress, so remember to be patient when it comes to your money.
Set yourself a maximum position size
Most people don’t realise that the sheer physicality of trading is a factor that can affect your emotions and decision-making processes.
For example, when you’re watching the price of a currency pair moving against you, you’re bound to feel more worried about it if it’s larger in value. This will make you more likely to take unnecessary risks, which further exacerbates losses.
Prevent these issues from happening by pre-determining how much money you want to commit per trade. With this in mind, try placing speculative trades on smaller segments until you feel ready to move onto large investments.
Always trade with protective stop losses
No matter how experienced you are, always make sure your trades have pre-determined stop loss values.
These will act as an emergency parachute if the market turns against you and ensure that even if the price moves in the opposite direction to what was expected, you won’t suffer excessive financial losses.
They help stabilise your emotions during periods of high volatility by giving your investments a safety net that stops them from being closed by nervousness or frustration at fast-moving price movements.