Heads or tales?
The first time I opened a binary options tradition account, I took the time to watch the education videos. You can imagine that the information you receive from the broker on “How to trade” is not exactly what you would call non-biased. The videos I watched made binary options look deceptively simple, and literally compared the basic winning trading strategy to a child flipping a coin.
In reality, the coin flipping method does not work. Even if you traded enough times for the theoretical 50/50 ratio to work towards your advantage, because you do not receive a full 100% return for a win, that will not prevent you from losing money. Instead, you have to beat the odds in just to break even.
In practice, I had a few good runs. But sure enough, the odds would always catch up with me. I lost.
Additionally, I noticed that when I started losing, I stopped winning. What do I mean? Well, when I’d make a couple wins, I’d feel good about myself. But as soon as I’d lose a trade, it was like a punch in the stomach. Rather than rationally trade, I started reacting. And the more I lost, the more rapidly I would pull the trade on the next irrational trade. Looking back, it was amazing just how quickly I would lose all my money.
Conclusion: In order to make money with binary options, two things are needed.
- You have to beat the odds. A 50/50 ratio won’t cut it. You need a win ratio of about 75% to make any money.
- You can’t trade emotionally. The only way to avoid emotional trading is to have a rational criteria by which you make trades.
The Question is, will the BINARY OPTION ROBOT(tm) help us attain these two goal?
This post is a follow-up to my previous post: What are Binary Options
Keep reading the Next Blog Entry for my hypothesis.