Conquering trading fears using binary options is much easier because the trader chooses his risk on entry and cannot lose more than what he pays on entry. Sounds amazing and it is.
Any trader that has traded futures or forex knows that the losses can be quite painful. Quite often, fear of “pulling the trigger” develops and the trader finds himself just watching the markets take off because he simply cannot overcome the emotional drama he has to endure if the market goes against. Yet, ironically a trader must be able to overcome this fear to succeed because, as a trader, you will have losses.
Conquering Trading Fears Using Binary Options
Binary options help traders to conquer their fear of losing because:
- Trader chooses his own risk level
- Pays the risk on entry
- Can never lose more than he paid when he entered his trade
Here is how it works. On the chart below, the tab identifies the market and expiration or the GBP/USD 8 am New York time expiration. Although a strike price is listed on the tab, the trader can also choose any of the strike prices that are listed on the right hand side of the screen. The red and blue boxes allow the trader to either sell or buy. If selling, the binary option must be either equal to or lower than the strike price immediately above the red and blue boxes. If buying, the binary option must be greater than the strike price immediately above the red and blue boxes.
Using the chart above, a trader with a bias to the upside may want to choose the >1.3271 strike for $69.50 of risk or, as the example shows, he could choose one strike higher for only a $37 risk per contract or $74 total trading two contracts (excluding exchange fees of $3.60 for two contracts round-trip). In other words, he can choose the risk level that he is comfortable with, just in case the trade goes against him.
Traders Have a Choice About When to Exit
Additionally, unlike other binary providers, with Nadex Binary Options, the trader can choose to exit the trade early or allow it to expire. For example, in this trade, by 7:47, the trade has resulted in a profit of $112 or $56 per contract (exchange fees listed above for trading 2 contracts). The return on investment would be 151%.
The trader also has the option to allow the trade to expire. If the trade expires greater than 1.3371, then the trader captures the maximum payout, which is $100 per contract. His profit would be $126 or $63 per contract (exchange fees listed above based on trading 2 contracts). In this case, the return on investment would be 170%. As the chart below shows, the GBP/USD did close greater than 1.3291 at 1.32914 (black box highlighted in blue).
More importantly though is that the trader is conquering his trading fears using binary options.