cards-19There are a number of ways in which binary options trading is similar to playing cards. While there is an element of risk involved in trading, as there is with poker or blackjack, there is also an element of skill, which can help to balance the odds in your favor. It all comes down to whether or not you are holding a good hand. When you are at the poker table, you can never be absolutely certain that the moves you are making are the right ones. But a poker player does not play certainty, he plays the odds.

It is no different with trading. When you sit down at your computer and open the charts for the day, you are looking at your trading hand. Most of the time you will not have a hand at all. You will look at the charts and you will not find a trade setup. If you do spot a potential setup, however, it will be time to analyze it the way you would your hand of cards, and decide whether to play that hand or not.

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Here are 5 questions you should ask to make your choice!

1. What is the bigger picture?

A big part of knowing whether you are holding a good hand is knowing where your hand fits in. In a game of poker, your hand does not exist in a vacuum. You have to understand what is going on with the context of the game. It is just the same with trading binary options. The same setup could be good or bad depending on the bigger picture.

How do you analyze the bigger picture? You can start by figuring out what the market conditions are. You may want to zoom out a timeframe or two on your chart (this is something you will have to experiment with and eventually standardize as part of your trading) to see whether the market is trending or flat.

Some trade setups are made for use in trending markets, while others may be ideal for flat markets (and may signal the beginning of a trend). Sometimes setups are ideal for trend reversals, and should be played at extremes. You should also be aware that you may be in a trend on one chart and not on another (this can really complicate things). A system that works great for trend reversals will not work well for trend continuations. A method built for trend continuations should not be used at likely reversal points. Know what your system was designed to do, instead of blindly taking every possible setup.

There are also situations where you should sit the action out no matter what. See a lot of spikes on your chart, where price appeared to be taking off and then suddenly reversed? It is usually a bad idea to trade in a market that is behaving like this—unless of course you have tested a system that helps you navigate through the minefields. Your goal is to find a trade setup in ideal market conditions.

2. Are all my system criteria satisfied?

What constitutes a good setup? For some traders, there may be just one or two indicators or criteria to be met. For others, there may be a dozen or more. You can think of each of your criteria as a card in your hand. Only the difference between poker and trading binary options is this: you are aiming for the royal flush every time. You only ever play the very best hands when you trade binary options. If you play a lot of so-so hands, you are going to end up losing over time.

If you are missing a queen or an ace or another card in your deck, you do not have a royal flush. If one of your cards is the wrong suit, you again do not have a royal flush. With your trading system, if you have satisfied every single criteria save one, you do not have a trade setup, and you cannot play your hand. When you see every criteria satisfied though and you have the perfect market context, you probably have a hand that is well worth playing.

3. Is it the right time to make a trade?

Timing is very important in poker, and it is very important when you are making a binary options trade as well. Let’s say you have the perfect setup as defined above. All of your criteria are met, your indicators are all giving you the same signal, and the message is “Trade!” The market is doing exactly what you want it to be doing.

… But it’s a Friday.

Should you still trade? The short answer is, “Yes, if your system tells you to.” Did you test your system over weekends? If so, and it was profitable then, it should be profitable now. But if you tested your system and found out that it was not profitable over the weekend, you should not take the trade, however tempting it looks. The same goes for holidays and days with financial reports and other events that can throw a wrench into the orderly market conditions.

The issue with weekends specifically is that there is almost always some kind of a “hiccup” when trading starts up again. Different markets have different hours, so you will need to familiarize yourself with trading hours for currencies, commodities, stocks, indices, and anything else you happen to be trading. Sometimes all it takes to make a system trade-worthy over weekends is a subtle adjustment. You might want to wait for a correction and then see if a trade exists.

What are the best times to trade? Typically all the times that are not unusual. Look for opportunities in the middle of the week and steer away from times when you see the market behaving erratically. Some traders even make the decision not to look at the charts at the end of the week or around holidays or news releases at all. This may or may not be what is best for you. The only way to find out is to test.

The right hand played at the wrong time is the wrong hand, even if it had a lot of potential. But with some slight changes to the way you do things and some adaptability built into your trading system (and tested!), you may be able to take advantage of opportunities even at awkward times.

4. Am I ready to make this trade?

Imagine you are sitting at your computer looking at a potentially beautiful trade. Everything is as it should be; your indicators look perfect, there is plenty of confluence, and the time is right. Unfortunately, you have a hangover from the night before, you are running on five and a half hours of sleep, and you are distracted by the fact that you still have some work from the office you need to tackle before tomorrow.

Should you take that trade? It is hard to walk away from something that might have been perfect, but trading in the situation above would be a mistake. Professional poker players take time to get into the right mindset before they take a seat across from their opponent. They show up focused and levelheaded.

Because you can trade binary options from the comfort of your home, you may sometimes feel tempted to trade in less than ideal circumstances. You can trade in your pajamas, but you should not trade when you are mentally still in bed. Eliminate distractions, make sure you are properly rested, and are in a good place physically and psychologically. Only then should you trade. Otherwise, you will find yourself making mistakes. Sloppy decision-making once you are in a trade can ruin it. How’s your trading environment?

Playing the Odds Means Making Smart Choices

You are going to be nervous when you trade, because every time you click “high” or “low’ on your trading platform, you are risking failure. That is true even with a perfect setup and perfect circumstances. It is not about being certain, though—it is about having a reason to be confident in what you are doing. Identifying a perfect trading hand is not as straightforward as looking at your hand in poker and identifying a royal flush. You build up confidence and learn to recognize a good hand by testing your trading method over and over again. Once you know how to read the charts and the indicators, you will know what cards you are holding and whether or not they are the ones to bring you the success you are striving for.