How to survive the loss of money to a trader of binary options

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How to Understand Binary Options

Updated: September 6, 2020

This article was co-authored by Michael R. Lewis. Michael R. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas. He has over 40 years of experience in business and finance, including as a Vice President for Blue Cross Blue Shield of Texas. He has a BBA in Industrial Management from the University of Texas at Austin.

There are 7 references cited in this article, which can be found at the bottom of the page.

A binary option, sometimes called a digital option, is a type of option in which the trader takes a yes or no position on the price of a stock or other asset, such as ETFs or currencies, and the resulting payoff is all or nothing. Because of this characteristic, binary options can be easier to understand and trade than traditional options.

How to Survive the Next Financial Crisis?

Although it is extremely difficult to forecast a financial crisis and even to pinpoint the moment it begins, you can still prepare yourself for the inevitable and come up with a backup plan. Economic cycles make it easier to predict an upcoming downturn but at the same time reinforce themselves. When people expect a crisis, they will behave accordingly: play it safe and pull the money out of the economy, making the downturn even more likely. The problem is, nowadays a lot of people believe the crisis is imminent.

Robert Kiyosaki says the next financial crisis will be like an avalanche. Fred Harrison, the man who has successfully predicted the financial crisis of 2008 three years prior, is warning about an upcoming recession. Amar Manzoor, authoer and expert, feels the same way. According to a lot of specialists, we are quickly running out of time to get ready for the “next big thing”.

But the question is how to avoid losing money and probably even benefit from the next economic crisis ? These are the 3 simple rules that can help you through another crisis that might hit the economy.

Make sure that you pay enough attention to the personal savings . Financial crises are often associated with high unemployment rate, low disposable income and overall stagnation. Everyone can end up losing their job. It may, therefore, seem wise to start saving today. Try to have at least 6-month worth of savings.

Invest in your own human capital . Learn something new, acquire new skills, until it is too late to become a professional in an unrelated field. Even if the upcoming crisis bypasses you there is still risk of your particular field becoming obsolete due to the spread of new technologies (e.g. robotics) or changing economic landscape (outsourcing to developing countries). Start transforming yourself into a more valuable employee now and don’t forget to build a strong social network. People who can bail you out in times of trouble are worth their weight in gold.

Two points mentioned above will help you save money. The third one, however, is about making even more on the bearish market. Crisis is a time to apply value investing principles . Market psychology works in mysterious ways. People are too optimistic during the boom and too depressed during the downturn to make financially sound decisions. They buy high and sell low. Which is in fact the opposite of financially rational behavior. With enough luck and skill, a major crisis could be turned into an opportunity to buy lower. Here is what some long-term traders do. They comprise a list of big companies with impressive fundamentals (more on that here ) and good enough chances of making it through the crisis. They then wait for them to lose a substantial share of the market value and make their move. It is quite possible, though not guaranteed, that the companies will regain the lost value over the course of a few years.

If you believe things will get really ugly during the upcoming recession (like they did in 1929), you can also consider buying gold instead of fiat currencies . This precious metal never goes out of style.

By following these simple steps, you will increase your chances of being better off during the next recession than the rest of your less prepared environment.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.

GENERAL RISK WARNING

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
87% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Outside the Box

Gary Dayton

How successful traders come back mentally stronger

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A large trading loss can be devastating — not only financially, but emotionally

As defeating as losses feel, how we react to loss that is more important than the loss itself. Inexperienced traders suffering a large loss can become hijacked by their emotions. Some may try to trade through the pain, denying it, often creating more turmoil for themselves. Some may withdraw, sweeping the loss under the rug to avoid thinking about it. Others may hunker down and try to “trade better,” determined to recoup the loss.

None of these reactions is constructive. In fact, they can be destructive if you don’t learn how to handle losing trades. Subsequent trading decisions are fraught with emotions that can drive erratic behavior. Depending on the individual trader, they may cut winning trades prematurely, overtrade, overstay unprofitable positions, or engage in other unrewarding actions — all done out of fear of another loss.

One major difference between successful traders and failed ones is how they handle trading losses. Successful traders treat losses as an opportunity to learn and improve their trading. Coming back from a large loss is challenging, but success is never accomplished by denying, withdrawing from, or ignoring trading losses. Losses — especially substantial ones — can be opportunities to become a more skillful trader.

Here are seven steps successful traders take after a loss to become emotionally stronger and more disciplined:

1. Accept responsibility: You made the loss; be sure to own it. Don’t brush it aside, hide from it, or blame the “smart money” for your loss. When you take ownership, you control your trading — and that’s exactly where you want to be.

2. Stop trading: Take a break to figure out what went wrong. Assess what happened by reviewing events carefully. Think about where you fell short. For example, did you take too much risk? Was the trade well-planned? Were you mentally sharp, or did you hold a losing trade hoping to avoid a loss?

3. Have a plan: Make a detailed action plan for future trades. The ingredients of your plan should include things you will do differently (e.g., setting and honoring a stop) and also what you will no longer do (e.g., holding a loser, hoping it will return to break-even).

4.Make a better plan: Can you identify factors from this trade that could be used to reverse the trade position? Good traders will take the loss as a stop-out and wait for the next opportunity. Better traders will reverse their trade — if market conditions permit — and make up not only for the initial loss but add profits to their bottom line.

Most trades that go strongly against us do so because of detectable reasons. Can you identify key market actions (e.g., changes in momentum, volume levels, price activity) that you can recognize and profit from? This will give you clear criteria for a trade not working and a fresh, new edge. Equipped like this, you are far less likely to suffer large losses in the future.

5. Put your loss in perspective: You are more than your trades. You have other roles that are important to you and others. One trading loss — even a large one, doesn’t define your worth. Getting perspective on your life when the chips are down helps restore balance so you can take steps to turn your trading around.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education How To Trade!
    Free Demo Account!
    Big Sign-up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

6. Be inspired: Use this loss as motivation for learning and develop your skills for better trading. The best professional athletes become excited when they discover they have a weakness in their game. They use the weakness as a catalyst to improve.

7. Get back in the game: Once you’ve done the recovery work, trade again. You’re mentally stronger and better-prepared than you were. Let the loss go and put your good intentions into practice.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education How To Trade!
    Free Demo Account!
    Big Sign-up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

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