The Worst And The Best Times To Trade Binary Options
Many binary brokers like to advertise the fact that you can trade binary options round the clock. You can trade 24/7 on our platform, they will often claim. But of course just because such a possibility exists no one should ever be tempted to try it.
If you’re a scrupulous trader and you try to follow and trade the markets using technical and/or fundamental analysis you will eventually come to an inevitable conclusion that markets shouldn’t be traded round the clock.
You will realize that there are certain times when it is easier to trade binary options or Forex, just as there are certain times when trading activity should be suspended.
The worst time to trade binary options
Let us first focus on times when we shouldn’t continue to trade. In binary options it’s more important to know when not to trade because losses exceed your winnings with most options.
So when is the worst time to trade binary options (or Forex or any other market for that matter)?
The worst time to trade binary options is right after a winning trade.
The main reason for this is because when we win we get a temporary high feeling from the winning trade, a ‘rush’ that obscures our cognitive senses and we tend to believe in upcoming good trading opportunities a lot easier. This is scientifically proven and there are numerous studies on this subject.
When we win, the brain releases a hormone called dopamine which basically makes us feel very good. The problem is that the as soon as that ‘dopamine high’ starts to diminish, the brain seeks opportunities to get another boost of dopamine.
We are then much more likely to see good trading opportunities in the charts or price action and trade on them quickly.
Chasing winnings is binary options can drain your account very quickly. The best solution to control this type of behavior is to follow your trading plan and remain in control.
Tip! Often the best method is to simply walk away from your computer and cool off for a couple of minutes.
The worst time to trade binary options is right after a losing trade.
Similarly, but for different reasons, one of the worst times to trade binary options is after you’ve just lost a trade. The reason for this is that in such a situation we feel a powerful urge to make up for the losses.
This pressure to recover our losses can also cloud our judgment when it’s most needed. As a result most traders rush into another trade.
If this isn’t bad enough many binary option traders make the big mistake of trading a higher amount in the next trade to cover the initial loss. Needless to say, this type of habit often leads to even bigger losses.
Tip! Again, one of the most effective methods to deal with losses is to keep calm, walk away from your trading station and have a glass of water and take a few deep breaths. Some traders like to do push ups or other quick physical activity to drain their body from the built up tension.
Trading when markets are inactive or sideways.
Trading binary options when markets are not very active may also be quite risky. The main reason for this is that the price action of underlying assets is less predictable without the presence of big influences and clear trends.
This largely depends on your strategy and your chosen options but generally if you’re trading lower time frames it is advised not to trade when market activity is low and trends can not be clearly defined.
Sideways market is often characterized by small candles moving within a narrow sideways channel. They reflect indecision among investors and often also show the absence of market movers.
Tip! The most active market exchange is during the London/New York overlap sessions.
Trading during news announcements and economic releases.
Certain news and the publication of economic data, such as Unemployment rates or Interest rates can cause prices of relevant assets to shift quite suddenly.
Many binary option traders have lost because they traded during such influential announcements.
Unless you’re a dedicated news trader and your strategy is based on the impact of news, it’s best to close your trades before any major news releases. To find out the times of of the most influential releases take a look at our economic calendar page.
Tip! Many traders like to trade after a big release when a new trend has been established and it is confirmed by the price action and trend lines.
The Best Time To Trade Binary Options
Now that we have looked at the worst times to trade binary options let’s examine when it is the best time to risk your hard-earned money on trades.
Best time to trade is during trending markets.
As it was mentioned earlier that one should not trade binary options during a sideways market, it makes sense the opposite would be true.
In fact, one of the best times to trade short term binary options is during a trending market. This means that trend can be clearly defined, it may be going up or down in a nice channel.
Of course, how you trade the price action within a trending channel is up to an individual trader and his or her own trading strategy.
Tip! However, it should be mentioned that generally speaking trading with the trend is a lot easier than trading trend reversals.
Markets are trending when market makers are trading, this usually falls during the busiest market sessions, the London and New York. It is no coincidence that many professional binary option traders trade live during the London/New York overlap sessions.
However this also depends on the trading strategy, the traded assets and your physical location. If you’re in Asia you might prefer to trade during the Asian sessions.
Best time to trade is when you’re alert, calm, and well rested.
If you intend to trade binary options you should never do it when you’re desperate for money, feeling down, or if you’re frustrated, tense, and tired.
In order to beat your broker’s odds and win at binary options you need to be well rested. Tiredness will make you miss many good opportunities and you will be unable to think clearly.
Trading is not a game. It is all about calculating probability and you can not do that when your mind is not fully alert. Your mind is the best trading tool you will ever have at your disposal so it needs to be cared for very well.
Likewise, one should only be trading binary options with a calm mind.
The right psychology is very important in trading.
A stressed mentality will result in mistakes and and tangible losses. This in turn will produce even more stress and may lead to even more trading errors.
So the best time to trade binary options is when your mind is calm and your body well rested. It’s when you are positive about your trading and you are clearly focused on accomplishing your goals.
Tip! Many traders take on Yoga and/or meditation practices that help to calm and control the mind and body. Before each trading session some may also find helpful listening to inspirational and motivational speeches or music to get into the right mindset.
Few final words
We hope this article helped to shed some light on the worst and the best times to trade binary options. Please note that times when to trade and when to avoid trading should be clearly outlined in your trading strategy and trading plan.
Please leave your comments below and share your advice and experience.Published in Education