Character Traits of a Successful Binary Trader
Binary options trading is an activity which requires the development of a few peculiar character traits in every trader who trades the markets. The market has some unique features which can only be exploited to the trader’s favour when these traits are developed.
The successful trading of binary options is partly technical and partly psychological, and it is a mix of various character traits which binary options traders need to have in order to succeed. Let us look at these character traits one by one.
Technical abilities of a good binary trader
To illustrate this point, let us use a popular game: soccer. To be good at soccer, you must have the following skills: speed, dribbling ability, awareness, balance, ability to hold the ball, passing, etc. Without these skills, an individual cannot play soccer.
Some players will have more of a particular skill than others, and some playing positions will have a demand for one or two skills more than others. Then there are some basic skills that every soccer player is expected to have.
Lionel Messi is a better dribbler than Tim Howard, a midfielder requires more of dribbling skills than a defender, and every footballer is expected to know how to pass the ball.
It is the same way with binary options trading. No two traders have the same trading styles or profit goals, but all binary options traders have a common goal: to make profit. Some traders will have more capital than other traders. Some traders will have more technical knowledge than others.
What separates one binary options trader from another in terms of technicality and skill in trading are the following character traits:
- Ability and willingness to learn
- Attention to detail
A trader who is inquisitive is one who asks questions. Such a trader is not just satisfied with seeing something happen in the market. The inquisitive trader wants to know WHY and HOW that event occurred. For instance, I have met lots of traders who never bother to find out why they suffer losses in trades. Many attribute losses to the use of a defective strategy and simply discard one strategy in favour of another. This is wrong practice. There are several occasions where a perfectly good strategy is used wrongly and so does not produce the desired result.
Inquisitiveness goes a long way
Binary option trading is unique in the sense that trades do not have forever to recover from bad entries or poorly timed exits. A trade made with a good strategy but with an expiry time set all wrong will end badly. Rather than set aside a strategy simply because losses are being sustained, the inquisitive trader will step back and go through each trade to identify whether there are areas where things could have been done differently. As Thomas Edison once said after so many failed experiments, he had discovered thousands of ways not to make an electric bulb. We all know how the story ended. The world would still have relied on candles for lighting if Edison had quit.
Ability to learn new things quickly
Hand in hand with inquisitiveness goes the ability to want to learn. There is always something to learn in the binary options market and indeed in all financial markets. There have been occasions when something new has always come up in the last few years which have impacted the market: the various quantitative easing programs, setting of negative exchange rates (ECB and SNB), minimum peg in the EURCHF, etc. These are all events which were quite novel in the market and are market movers which create trading opportunities.
Attention to details
Attention to detail is another character trait of successful binary options traders. Just before a trade is initiated, several parameters are shown: expiry time, trade amount, market price, type of trade, asset to be traded, etc. A trader should check all parameters to see that they reflect the trade to be made and that there are no errors. So many traders make wrong entries due to lack of attention to detail. Attention to detail will also enable the trader implement strategies according to the parameters and rules on which they have been built. This is also a necessary trait to develop if you are following a signals service.
Practice makes perfect
In order to succeed in trading one must practice as much as possible. Similar to professional footballers if a trader stops practicing and honing his skills he will eventually lose them. There are thousands of strategies that can be used but it’s best to pick a few that work well and practice them relentlessly on a demo account or paper trade (noting entries and their expiry times in a notebook) until they become profitable. Needless to say, practicing requires time and a certain degree of psychological and physical devotion.
Psychological traits of a successful trader
We know that good strategies that can predict the behavior of currency pairs to some degree of accuracy are required to profitably trade binary options. However, strategies are not marionettes. They must be applied by human beings, and errors can come from the human aspect. There could be errors of judgement and errors of implementation. These are all psychological factors.
Trading is highly psychological because it is all tied to money, the very center of human existence.
The ability to function as a human being depends of stuff which are bought with money. Loss of money will therefore produce bad psychological feelings, while addition of money to the individual will stir up great emotions. These emotions can produce good and bad outcomes. It is not all the time that good emotions will produce good outcomes, just as failure in the markets is not always a bad thing. It is all about acquiring the following traits:
Self-control is necessary to succeed
Self-control is that trait which allows good emotions to produce good outcomes. A trader who is on a winning streak can easily get tempted to scale up trade volumes beyond acceptable risk levels in order to land that one big payday. Many accounts with several winning trades have been taken out by one huge trade gone amiss. Self-control keeps the trader in check; using only acceptable risk levels to compound profits.
Caution, well balanced
Caution can be a good thing. Here, we are not talking about the kind of caution which paralyses traders from taking clear opportunities. Caution here is all about taking care to filter out the best trades.
Boldness when needed
Rather than get paralyzed by several losses, a bold trader is one who is not afraid to make the trade when the opportunity presents itself to profit. It also takes boldness to recognize a failing trade and use the Early Closure function to kill the trade off and conserve capital.
Patience is a virtue
Patience is one of the best character traits a trader can develop. Many bad trades are screened out by patient traders, who prefer to wait for clear opportunities rather than nebulous ones. Some of the strategies described on this blog are those which require patience for them to setup properly for the trader. Trading is a lifetime event. Once trading skills are picked up, they stay with the trader for life. There will always be a profitable opportunity in the binary options market, so if no opportunities are seen for several days at a stretch, do not worry. Patient dogs will always get the fattest bones.Published in Education