You can get rich trading binary options, but most people will not. Your ability to be successful trading binary options depends upon your ability to build and maintain a successful trading strategy. Trading profitably over time ultimately comes down to discipline and your willingness to adapt as markets change. Most people do not have the dedication needed to get rich from trading. Only through hard work and a systematic approach will you give yourself a chance to succeed.
If you are able to trade profitably in a systematic manner the sky is the limit in terms of how much money you can make. The key to becoming wealthy from trading binary options is to have a high enough winning percentage to maintain profitability over a large number of trades. After you are able to trade profitably, you simply increase the size of your trades, and the size of your earnings will correspondingly increase as well.
Get Started With Binary Options Signals
If you don’t know how to get started with binary options trading, or if you have tried it and you haven’t made any profits yet, then you should try binary options signals. Basically the signal providers will give you a 70-80% accurate prediction on whether the price of an asset will go up or down.
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Why It’s Difficult To Get Rich From Day Trading
Getting rich from day trading is one of the hardest things for people to do. There are a number of reasons why this is the case, and it is becoming increasingly difficult over time.
- Computer algorithms have taken away a lot of short term inefficiencies in the markets. These are the same inefficiencies that day traders used to exploit for profits.
- Stock market transactions occur in a fractionated marketplace. All transactions used to take place on the New York Stock Exchange, Traders knew the buy to sell ratios on the books, and could make relatively reasonable predictions based upon the inventory of orders. Today, transactions occur mostly over ECN markets and dark pools, and even the NYSE now uses an electronic order matching system.
- If a trader is using binary options as their trading instrument, they need to win on more than 50% of their trades to be profitable (assuming all positions are the same size). Binary options are designed with the idea that a brokerage on aggregate will have 50% winning trades and 50% losing trades to contend with, thereby making them money over a large sample size. A trader needs a system that maintains a winning percentage closer to the 60% mark to remain profitable.
- Because a trader needs a high winning percentage with binary options (or they need to keep losses small when they trade other securities) trading requires an incredible amount of discipline. This is extremely hard for most humans to maintain over the course of long periods of time. As any professional day trader will tell you, a small lapse in discipline can lead to a huge loss of money.
It’s Still Possible To Get Rich Trading Binary Options
Even though it is extremely difficult, it’s not impossible to get rich from trading binary options. Binary options often pay out 70% to 90% above the trade size to a winning trade. With that sort of potential, of course it is possible for people to get rich. In order to get rich, there are some important steps that you will need to take.
Build A Strategy Using A Demo Account
It is very important for traders to have a demo account so they can test and build strategies in a sandbox environment. With a demo account, a trader has the ability to experiment without losing any real money. Only after a reliable strategy is developed should the trader move the strategy from the demo environment to the real money environment. If you are struggling to build a strategy, consider that there are 3 main directions a trader can take.
- Reading the market. This involves looking at the share inventories on the books and looking at the prints (or tape) of a stock and/or market. A trader tries to read the direction of the prominent order flow, and the way the market is trading each particular day (i.e. a stock is struggling to rise even if the S&P 500 is going up). To develop a market read you will need good data feeds showing prints across all ECN markets, dark pools, and all order books. You will then need to watch individual stocks, as well as the whole market very closely over time to understand how different factors affect how it moves.
- Using technical indicators. This is a popular method with many traders. Many people start with using indicators such as MACD, Fibonacci ratios, the relative strength index, or moving averages. More advanced stochastic or Elliot wave indicators may also be used. Whatever you use, make sure that you are applying it to a stock where the indicator is a good fit (not every indicator works for every stock). There are also certain market conditions that lend themselves to certain indicators better than others. To make money with indicators you will still need to test and hone your strategy for using different indicators at different times.
- Using a trade indicator tool. Some companies put software out that provides buying and selling signals for traders. Like any indicator, these do not work all the time, but may work well during certain times or market conditions. At How We Trade we recommend market club. You can sign up for a free trial by clicking the auto trade indicator on the menu.
Whichever method you ultimately use, make sure that you test and refine it in a demo account environment. Only after you can reliably win in the demo environment should you move your strategy to a “live” account.
Scale Up Your Size Steadily
If you are able to exploit a profitable strategy, you will need to increase the size of your trades steadily. It is important that you do not increase your size by large jumps (you don’t want a couple of losses to wipe out your whole account) but you want to make sure that you are consistently increasing the size of your trades. Every trader needs to accept that no strategy will be effective forever. If you have a strategy that is effective, you will need to take advantage of it as much as possible, for as long as it lasts. You will not get rich by taking small trades, but if you are able to increase your trading size enough you do have the ability to get wealthy.
Maintain A Positive Attitude Through Losses
Every trader is going to experience some losses, no matter how good they are. It is very critical to stay in a positive frame of mind even during difficult times. A positive attitude prevents you from missing winning trades that present themselves to you in the future. It also prevents self destructive behavior that a lot of trader allow themselves to engage in (reckless trading). For tips mastering your emotions while trading read here.
Recognize When Your Strategy No Longer Works and be Quick To Adapt
Many traders who used to have a working strategy make the mistake of sticking with the same strategy even after it no longer is profitable. A successful trader will realize when their strategy needs an adjustment and stop trading. Remember, losing money by trading is much worse than not trading at all. If your strategy is no longer profitable you will need to stop trading immediately and go back to the sandbox (demo account) and either adjust your existing strategy or develop a new one. Successful traders do not waste time trading with a losing strategy. Trade with a winning strategy only.
Will You Get Rich?
It is entirely up to you. While it isn’t easy, there are countless examples of traders become very rich from the markets. Binary option traders are no exception. The key is to exploit any security and every strategy as fully as you possibly can. Maintain strict discipline, a positive attitude through the ups and downs, and develop a winning strategy. If you do this, you can become wealthy.