see clearly the direction you are goingHindsight, as they say, is always 20/20.  You are going to make mistakes as a newbie trader, and there is no getting around that.  But looking back at my early days as a trader, I think about all the things I did wrong or struggled with and how many of them could have been prevented if I had only had some good advice or a different perspective.  

For that reason, I want to share with you some of the things I wish I had known and understood when I first started trading, way back in those early days when I still didn’t know an EMA from an SMA.  Maybe some of this will help you to avoid the same stumbling blocks and pitfalls that held me back.

  • Simple price action is awesome.

I never want to be that trader who says, “My way is the only way!”  There are tons of great techniques for trading binary options.  You can identify a lot of amazing setups and make a great living through fundamental or technical analysis.  But fundamental analysis just was not for me, and neither was technical analysis for the most part.

Price action is beautifully simple, the most elegant of all trading methods.  It is easy to learn and it will clean up your charts.  Instead of a thousand indicators cluttering up your view, you will actually learn how to see price clearly just by looking at the bars.  With enough practice, it becomes like reading a book.  It is a language you will eventually become fluent in.

In short, price action is wonderful, and I really wish I had learned it from day one.  Why did I waste so much time learning to use indicators I have not touched since?  There are a few indicators I am really glad I learned how to use, because they work great for providing confluence with my price action, but it would have been so much better if I were doing price action from the start.  

  • You need actual capital to invest, and more than you think.

This one really hurts to think about.  For a lot of traders, it is going to be the number one roadblock, and it is the one no one wants to talk about.  Why?  Maybe because it is embarrassing.  We are all taught that we need to appear richer and more successful than we really are to everyone we speak to.  

For that reason, no one is going to want to admit that the only reason they got off to a flying start with trading was because they were out of the gate with $20,000 to invest—money they could afford to lose.  And those who really did start with $2,000 or less in their bankroll are not going to want to admit to you just how much of an uphill war they had to wage.  

The reality is, if you are starting with this little, you are in the majority.  And it is going to be a very slow climb for years.  That is the painful truth no one wants to face or admit.  At least if you know that starting out, you will not get as discouraged as I did when I found out the truth!  You will find the power to persevere and keep at it!

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  • You should always invest using your own money.

This is connected to the moment above when you finally figure out that you do not really have the starting capital you need to make a living trading in the beginning.  Your next thought will be, “Okay, I need to invest someone else’s money.”

That does work for some traders, so I do not want to dissuade you from it altogether.  But I wish I had just accepted the fact that things were going to be slow-going and difficult at the outset and not tried so hard to find shortcuts around it.  Trading someone else’s money carries extra layers of responsibility and consequences should something go wrong.  “Money you can afford to lose” never is someone else’s money!  So if you can, you should stick with investing your own in the beginning.  

  • Market context is everything.

Here is something I wish someone had pounded into my head repeatedly with a sledgehammer!  One of the hardest lessons for me as a trader was figuring out that while I understood what a good setup was supposed to look like just in terms of the price bars, I did not understand that a good setup also needed to include the context around those bars.

That was why a system that seemed like it was working great stopped working one day.  Conditions changed, but since I had no understanding of context, I did not realize I was trading in the right context to begin with by coincidence.  I had a really hard learning process to grapple with learning to identify proper context.  I had to relearn my entire concept of what a “setup” really was.  All of that could have been prevented if I had just managed to learn it from the beginning!

  • The market is constantly changing.

Everyone wants to think if they can just find the holy grail of systems, all their problems will be solved forever, because the trading system will do all the work and continue to deliver perfect results for the rest of time.  

Nothing ever works that way, though.  I wish someone had told me from the beginning that a really great trading method would serve me well, but it was never going to solve all my problems, and it would never be immune to the constantly changing conditions of the market.  I also wish someone had told me sometimes those are slow, big, sweeping changes that alter the entire personality of an asset.  

When that happens, you have to adjust, and yes, that means tweaking your precious system into something slightly different.  If I could have just accepted that was part of the job of being a trader, I would have been so much better prepared for the day I first had to do it!

  1. You do not always have to be the first trader to get in on every move.

As a beginning trader, I remember reading repeatedly everywhere I went, “You need to get on a trend as early as possible so you can ride it out as long as possible and rake in the profits!”  

That is not bad advice, but I am not sure why it is so often sold as the gospel truth.  There are a couple of reasons why I feel it represents flawed thinking:

  • Not all traders are going to stay in trades indefinitely, rolling over again and again.  A lot of traders are going to stay in their trades up until the expiry time and then just get out, or they might even get out early.
  • You are going to get faked out a lot more often if you are constantly trying to get in on a new trend right from the start.

Why should you obsess about riding out every trend to its maximum if you are not going to stay in your trades that long anyway?  It may make sense to think that way for some longer-term trades, but for trades that are going to last a few hours or days, you do not necessarily need to be concerned with riding out the trend.  Some of us just do not like handling exits that way.  There is nothing wrong with that.

The second issue is more of a concern.  Yes, it is nice getting in on the start of a new trend.  But how many times do you find yourself in a losing trade because either 1-all you got in on was a price spike, or 2-you ended up losing on the retracement?  

This is why I firmly feel it is better to wait for the retracement, and then to get in on the trade.  When price retraces and then continues along the trend you believe you have spotted, that is confirmation, and a much safer time to jump in and grab some profits.  Oh, the money I could have saved by just learning that sooner!

  • Binary options trading is not about predicting the future, but understanding the present.

We talk so often about predicting where price is going to go, but the subtle and confusing thing about trading is that you cannot ever really know the future.  You may have heard some traders tell you that trading is not fortune telling, but it may be hard to understand what they mean.  I certainly struggled with it.

Consider fortune telling for a moment, however.  What do fortune tellers actually do?  Some of them are quite skillful and actually provide great advice.  Are they really looking into the future though?  I think we can say pretty firmly, “Probably not.”  

What they are good at doing is looking at the present.  They can pick up on subtle hints and clues and intuit what may be going on in a client’s life.  They can then make solid recommendations based on what they see.  Those recommendations may appear predictive of the future.

Trading is just the same!  You really are focusing on the present, on understanding the trends and changes developing now.  You cannot peer into the future, but you can make informed hypotheses about what is coming based on what is occurring in the present.  Since it is actually hard to see the present clearly, your trading decisions and subsequent profits may appear to others like magic.  

I want to talk about how this relates to getting out of trades.  How do you decide when it is time to abandon a trade before it expires?  In my case, if I get a price action signal telling me that a trend no longer exists, it is time to jump ship (and possibly reposition).  

There may be a slight delay before the new trend manifests on the charts, but the price action signal showed me that the change was already in progress.  To someone else, I appeared to predict the future, closing my trade just in time.  But really, I just saw the present more clearly.

  • Other traders can be an invaluable resource to you.

Avail yourself of other traders!  They are some of the best resources you are going to find, and frequently they are helpful, forthcoming, and friendly.  Not all of them are of course—some will take their trading secrets to the grave.  But many others are happy to share their knowledge.  They know that 90% of other traders are no threat to their profits, and know that by collaborating with the remaining 10%, they strengthen their position.  Reach out to these people.  They can change your life.

  • Not all other traders necessarily relate to what you are going through.

You are going to meet people from all walks of life when you are trading.  Some of those people will understand the challenges you are facing, and will be able to give you invaluable advice and the support you need to move forward.

I wish I had realized however just how many traders were also not going to be able to connect to me and understand my situation.  On top of that, it would have been nice to realize that they would still feel like they could relate to me, even though they couldn’t.

Basically, if you are opening an account with $500, the odds that a trader who started with $50,000 is going to be able to relate to your situation are pretty slim.  Some traders have perspective on these differences and can still help you.  Others however will just keep giving you advice that would fit someone in their position, not realizing that most of it is completely non-applicable to you (and sometimes even counterproductive).  When you get advice that is not a logical fit for your situation, you should feel free to disregard it, even if it comes from a successful trader.

  • Not all those people rushing past you right now are really on the road to success.  A lot of them are just gamblers throwing money in a slot machine.

As a beginning trader, I got really discouraged when I would see a lot of other traders on forums and blogs seemingly racing past me to glowing success and the end of the rainbow.  I wondered repeatedly what I was doing wrong, and what I could do to catch up.

Are some of those traders still successful today?  Almost certainly.  Are the majority?  Probably not.  There are so many shortcuts that are available to other traders that may not be available to you.  Sometimes people race past you in the beginning because they started with more money.  Other times they fly by because they are lucky, or they are using good signals you cannot afford.  Still other times they received free coaching or other perks that are out of your reach.

The fact stands that 90% or more of traders will fail sooner or later.  That includes many of those who seem like they are leaving you in the dust.  You cannot live on shortcuts forever.  Eventually the day will come when your skill is tested.  When that day comes for you, you will actually have the skills to pass the test.  But a lot of those other traders who were in such a rush to the get to the end of the line?  It may sneak up on them sooner than they expect.  Those who are essentially gamblers playing a slot machine (the majority) will fail.  

So do not worry too much about other people.  Comparing yourself to others usually makes no sense since you are playing a different game than them anyway.  All it will do is make you feel deficient, when you may actually be the one who is excelling in the only area that ultimately matters—skill!  

  • Binary options trading is not a scam, but it is not for everyone.

Finally, I think one of the most daunting things for a lot of newcomers to binary options is hearing all the time that trading is a scam.  You hear this in part because there are a lot of untrustworthy companies (which is why we have rated the best brokers), and in part because traders who rely on shortcuts and try to gamble their way to fortune typically lose everything.  Those traders scam themselves, but they try to convince you it wasn’t their fault that they lost.

Binary options is not a scam, but neither is trading for everyone.  If you think trading really is for you, go for it, and do not let other peoples’ failures hold you back!  Trust in yourself, and ignore all the people who try to stop you.  You can tell them that trading is not a scam until you are blue in the face, but they will probably still refuse to listen.  Let your profits prove your point instead.

Now you know some of the things I really wish someone had told me when I was a newbie trader.  I hope that reading this article has cleared up some of your expectations and answered some of your questions, and maybe steered you away from some dead-end paths you were thinking of treading.  Good luck on the path to success, and don’t give up even when the road is long!