Traditionally, binary options have been a set and leave style trade.
Essentially, you chose the asset you were going to trade on, you chose the expiry and the movement of the price, you made your prediction, and then you waited until the end of the trading period, or expiration of the trade, to know whether you won or lost.
Nowadays, there are new options coming into the market, such as delaying trade expiry and ending the trade early.
What these had done is brought in advanced psychology to what was a fairly basic trading psychology dynamic.
Advanced Binary Options Psychology.
It used to be that most of the psychology was around choosing the trades.
It was important to stay balanced mentally and logically plan each and every trade.
If a trader could master this, then they could become successful without being hijacked by their mentality.
This involved making sure that they had processes in place for when trades went wrong.
This was naturally the most likely time that a trader was to make bad decisions.
In poker, they call this phenomenon, “tilt,” and essentially, it means that we become more impulsive as we get more emotionally involved in a situation.
If we feel something has gone awry, and it wasn’t our fault, or it was due to perceived bad luck, then we are more likely to chase our losses.
In trading, a similar phenomenon happens.
Anyone that has seen the film, “Rogue Trader,” where Nick Leeson lost millions and millions trading out in Asia will know exactly what “tilt” is in a trading context.
With the advent of the new trading tools, it is now possible for traders to get involved while a trade is in process.
This brings in more choices and more psychology.
Traders are more likely to keep an eye on exactly what’s going on with the trade and look for situations where they should be intervening.
This can be more stressful for those that can’t get away but also more comfortable for some as it provides a measure of control.
The psychology certainly is more complicated.
Traders have to avoid the temptation to make impulse decisions during trades.
They may look for opportunities to end early while keeping as much profit as possible.
But this can lead to an eroding of profits in the long term as the hedges they make can dilute profits from good decisions.
Traders also have to learn to let go of trades.
If they made what they felt was a good decision and it went against them they have to avoid the temptation of delaying expiration if it is not the right thing to do.
It is a natural human instinct to want to preserve what you have, and by delaying expiration you are delaying the crystallization of a loss, but you may well just be adding fees and removing your edge.
As a long-term strategy, delaying expiration can prove disastrous.
Binary options trading is about using the tools at one’s disposal to make good decisions and to eke out profits on a long-term basis.
Anything that reduces profits as a percentage of one’s stakes is going to be a bad thing. The psychology of binary options has changed.
Traders that look for the more innovative platforms will no doubt see more and more tools and mechanisms in place that will still further impact the psychology of binary options trading into the future.
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To learn more about Binary Options, check out the Education section.