Is there such thing as overtrading binary options? What brings us to do it and how can we stop it? Get your tips here in our article!
Whenever you read advice on how to trade, you are usually going to stumble upon many mentions of planning, control, analysis, budget, and so on. This is no mistake. When you look at all of these words at once, what would be the first description of trading that comes to mind? Well, I think of balanced and measured trading.
Trading binary options is often associated with quick and easy earnings. Binary trading has short and long expiry times, many trading opportunities and a two-way outcome possibility. Traders tend to get carried away, especially when they don’t have experience. Loses lead towards more trading. More trading could lead to more losses if trader doesn’t follow his plan and the vicious cycle starts here. Blood rushes through your veins, frustration rises and you can’t keep yourself from „just one more“ trade decision. Before you know it, your plan is totally forgotten and your budget is heavily decreased.
So, yes, there is such thing as overtrading.
Why do People Tend to Overtrade?
There are some main reasons that we would like to bring up and they are clearly psychological:
The hunger for a good result is sometimes too big. You can say it is motivation or you can just call it greed. If the win happens, good. But, if it doesn’t, it creates frustration. And frustration leads towards bad decisions.
Another thing is that traders don’t deal well with losses. They want to annulate them as soon as possible. Then comes more trading and it is usually totally against what was planned. And if you don’t have a plan, your chances are not so good. You will get burnt out.
Losing money is not the only reason why traders fall into the trap of overtrading Traders can hit a good run of results and suddenly get carried away. They want to cash in on a good run while they are still at it. But, it is not the „good run“ that brought them success. It was a good plan that did the job. Continuing trading mostly isn’t part of the plan and in the long run, it can’t bring anything good to the table.
„You are not going to regret the things you did, rather the things you didn’t do“. It seems like many traders are led by this saying when in reality, it would be better if they would just ignore it. Many traders feel like they are missing out on huge moments, like every second could be the big breakthrough. You may think that you are missing out and that you are not productive or accurate, but that is not true. Most of the time it is just better to stay away and not trade for a while, then to rush into trades without plan. Time can pass and big changes don’t need to happen in short time. Instead of placing trades, trader can invest his time in knowledge and research new strategy that will help him understand and increase his knowledge. For example, you could search for a strategy that would include more trades, rather than rushing into more trades without the strategy. There are moments in trading when it is good to act instinctively and grab the opportunity. But, remember, it is mostly patience and plan that do wonders.
Does every frequent trading period automatically mean too much trading?
Of course not. There is no objective number, per day or per hour, both can be used to decide what is too much. It is highly subjective and it all depends on your budget and plan. If it is not damaging to your account, then it is not too much.
How to avoid Overtrading?
There are some main points that help you focus and not get carried away:
In most of our articles, we spoke about having a plan. Plans are the base of successful trading. Good plan never overuses your resources. It gives a vision on what you need to do with your trading. If you know what you need to do, then the risk of overdoing is greatly reduced. So, decide how much you want to trade with. Make a distribution of trades on the assets you wish to trade with. Also, decide on the expiry times. Stick to your plan!
Trading can sometimes be an emotionally and mentally challenging task. Sure, practically none of us trades for fun. We have our expectations and wishes and we invest a big chunk of our time and money to make those wishes come true. But, trading must be seen exclusively as a business. It is really important to stay cold-headed and a little bit shrewd. This is especially the case with 60 seconds options. They are exciting, fun and very dynamic. It is really easy to lose sight of your goal and boundaries that you set when trading those options. So, don’t let get carried away and always keep control of your trading.
Remember to Think Long Term
Nothing comes over night. Neither does trading success. If you hit a good streak, of course, you are going to be happy. But, don’t get carried away thinking it will always go like that and continue trading without plan and purpose. The same applies to losses. Newsflash, losses happen! And they are a normal part of trading. Accept them when they happen and control yourself not to do anything rash straight after.
Overall, it is important not to diminish the importance and the negative effect of overtrading.