Many traders are faced with a seemingly strange situation - they get good results when trading on a demo account, but cannot repeat it even 50% when working with real money. This example proves the influence of psychology on the process of how to make money on binary options.
Working with a virtual account, he calmly implements the selected trading strategies, successfully applies his own knowledge. As soon as a trader deposits real money into the account, his emotions, inefficient rational attitudes and fears interfere with the course of trading. He is overly cautious, takes unnecessary risks, closes a profitable position ahead of time, or enters the market before the trend changes.
Knowledge of psychological attitudes and own complexes, control of emotions, work with conscious attitudes allows investors to avoid such situations. Moreover, a trader who understands how the market «crowd» will behave can predict the dynamics of the value of financial instruments.
In this article, you will find information about the impact of emotional and rational factors on the effectiveness of stock trading. Also get recommendations that will help you learn how to control your emotions when working with trading binary signals.
The main psychological elements
The psyche consists of a personal (emotional-volitional) and cognitive parts. The processes and states associated with each of them govern the behavior of people. In everyday life, according to the degree of influence on human activity, they are in a condition of conditional equilibrium, the point of which is individual for everyone. A violation of balance leads to a change in habitual behavior.
Emotions - mental processes involved in the management of human behavior.
Joy, fear, anger, and complacency are examples of emotions. Emotional people often commit spontaneous actions; they can not always control their behavior. On the other hand, a lack of emotion makes a person's behavior similar to a mechanism, which is also not very good.
The cognitive sphere, which includes thinking, memory, attention, perception, understanding and other processes and states, also affects the activities of people. It is this part of the psyche that is responsible for the direction of behavior, decision-making, and their implementation.
The high speed of perception, the ability to concentrate for a long time, the ability to analyze information to help binary option trader. However, excessive functioning of the cognitive sphere quickly leads to general mental exhaustion, which negatively affects the results of the investor's work. This also applies to biases, both in the rational and emotional spheres. In other words, a conditional mental balance is an optimal state that allows you to trade consistently and profitably.
The «working» state of the trader's mind must be adjusted in accordance with his individual psychological characteristics, if they are pronounced. For example, a very emotional person should be able to take emotions under control before bidding. Any character trait can be used to improve trading results!
Where to start?
Compliance with the rules of control of the psychological state, disciplined adherence to the chosen trading strategy, the formation of effective rational attitudes and the control of emotions are the main methods of mental management.
First, the trader must prevent the development of mental states that reduce the effectiveness of his activities. Following the following rules is one of the most powerful means of controlling the psyche, although, despite the obvious, most do not follow them. So, to increase the effectiveness of binary options, we do the following:
- Sleep at least 7 hours a day. Sufficient sleep normalizes the emotional state of a person, and also improves the course of cognitive processes. For example, a trader who has had a good night's sleep will be more attentive during work than a trader who has started trading after a nightclub.
- Give yourself regular physical activity;
- Do not use antidepressants and other «active» substances before and during work. Put an equal sign between trading and driving - you cannot get behind the wheel and turn on the trading terminal if you do not fully control your actions;
- Take a break from trading for 5-10 minutes every hour. Take a walk, do a warm-up. Try not to think about trading during your break;
- Do not start working if you are experiencing strong emotions. Euphoria, stress, fear, violent, joy: such states reduce a person's ability to critically assess the market situation.
Follow the selected binary option strategy:
- Constant adherence to the rules of the strategy is one of the most effective tools to reduce the burden on the trader's psyche. The strategy protects from unjustified risk, gross mistakes when accepting opening trades, as well as from useless market surveillance;
- Make for yourself the chosen method, using a system of rewards and punishments. For example, find yourself for violating the trading rules, even if it is a small limit on the volume of new positions. In addition, you can motivate yourself to follow the strategy by re-reading the evidence of its effectiveness every day.
Formation of effective rational attitudes:
The concept of «rational attitude» is used in various areas of psychology and psychotherapy to determine stable mental patterns that especially affect human behavior. «You can't trust anyone», «I have no luck with money» are examples of bad misconduct. «I have the right to make a mistake», «fear and difficulties point the right way» - such attitudes increase the effectiveness of human activity.
- Identify a few basic concepts that you think give positive results. «Bad trades and losses teach me to better understand the market» - this is an example of correct thinking for the exact binary options strategy. Follow these steps so that it starts to have a positive impact on the results of trading: formulate a useful attitude from your point of view and write it down on paper. Read the recorded statement and think about it. Do you agree with what you have written?
- Write down the rational setting on paper another 20-30 times. Then say it out loud. So you will help the psyche to accept it.
- Always keep a notebook or a piece of paper near the workplace, on which all the mental rules that are currently being used are written down. Reread them from time to time.
- Effective rational settings help the binary options trader both when using real binary options signals and in everyday life.
The ability to control emotions is one of the most important qualities that everyone needs.
- To cope with fear, use the «attack on fear» technique used in rational-emotive therapy. Its essence lies in the fact that first you need to do the actions that the person is afraid of. For example, if for some reason you are afraid to use top binary options signals, do it regardless of possible losses.
- You can also just imagine what will happen if your fear is justified. For example, if you are afraid of losing your entire deposit due to bad trading decisions, imagine the moment when this will actually happen. Think about it, maybe in this situation you can find something good.
In addition, constantly seek and apply new psychological techniques to effectively control emotions. Knowing his strengths and weaknesses, a trader can better than others understand how binary options signals work; change his strategy or trading style in time. He also gets the opportunity to influence his own cognitive and emotional-volitional sphere, increasing the profitability of trading on any asset and market.