Make Hard Trading Decisions – Because Somebody has to Make them
“Life is a sum of all your choices” – Albert Camus (French Nobel Prize winning author, journalist and philosopher)
It is true that all our choices affect us in some way and to some extent. Some have little impact on our life; others have a big one and affect us for years to come. Of course, choosing a double espresso over a latte macchiato will not have such a big impact on our lives as choosing a two-room apartment in a busy city over a country house with a nice lawn, a dog and a white fence. This type of decision has a stand-alone impact, meaning that one decision will generate the consequence. But there are other types of decisions: many small decisions will lead to the consequences. Take smoking, for example: It’s bad for your health, but smoking as a whole is composed of thousands of small decisions taken over the course of the years. Each time you open your pack and smoke a cigarette, you made a decision, but that single event will only affect you if it’s part of a whole – one cigarette doesn’t affect your health so much but being a regular smoker does.
In case you’re wondering – No, I’m not going to talk the whole article about smoking or about the purpose of life or how the Matrix should have ended. But keeping in mind the smoking example, think about your Binary Options account: one loss will probably not affect it so much (assuming you apply at least a primitive form of money management), but what about 50 losses? Yep, that will do it; that will wipe it out probably. Even if you don’t care so much about a bad trade, you must understand that it acts as a part of a bigger event which will eventually lead to your account’s demise. That’s why it’s important to treat each trade with the importance it requires and sometimes to make hard decisions.
How Hard can it be?
A loss instinctively triggers emotions. It’s built into your DNA so don’t fight it, instead, learn to control it. If the market just took 100 bucks from you, you will probably feel the need to make it back – it’s a mixture of revenge, wanting to prove you are in fact right, greed and financial concern. The difference between the trader and the gambler is that the latter will yield to those emotions and will open another trade… or roll the dice one more time, it’s the same for him. So if you trade according to a predetermined plan, you are treating Binary Options as a business, but if you are trading just based on emotions, without controlling them, you are just a gambler and your place is in the casino, not on the trading floor.
I talked about trading according to a plan. That plan should be laid out before you start trading because that’s when your mind is free of emotions and the analytical part of your brain can prevail. Once emotions kick in, it’s a lot harder to think straight. You need to have a plan, no doubt, but the more difficult part is following that plan and knowing it’s the tool that helps you manage your money and risk. A basic form of a trading plan is deciding when to stop trading, even if you are winning and especially if you are losing. For example, you may decide to stop trading for the day after three losses or after three winners. Doing that, you limit the risk you are taking and you know the worst that can happen is to lose three trades in a day. It’s tough to stop trading, I know, but after three losses you are probably angrier than you were before, so your chances of winning are slimmer than they were before the three losses.
Almost the same applies to winning: after three In the Money trades, there’s a chance you will get cocky or at least more confident and that’s when mistakes start to happen. So you don’t pay much attention to your analysis or to your strategy and rush in, looking for more profit because it’s fun and it pays off – the perfect combo. Hmm, but gamblers are doing it for fun and traders are working when they trade. If you are at work, then stop after reaching your daily goal. Close the office and head home or drink a beer with friends or do whatever is fun for you… because work is now over.
Plan the Trade and Trade the Plan
Many people start trading Binary Options to achieve financial freedom and quit their regular jobs. Not having a boss is great, but if you want to become a trader, you will have a boss – You. It’s the “You” who is capable of thinking, logical and coldly, not the “You” who is acting crazy trying to immediately recoup all the losses. Making decisions is tough, but you have to do it; you have to stop trading if you are losing in order to avoid further loss and you have to stop trading when you have reached a predetermined daily limit of wins. This will keep you from giving back the money you just made. Decisions are part of your everyday life and of your trading life – go with the trend, go against it, invest $200 or maybe $1K, stop trading, don’t stop trading… Yep, it’s hard, but somebody’s gotta do it and if you want to make money, that “somebody” has to be you.