Binary options newcomers always tend to find out a perfect trading strategy. They start with a new system, check it on the currency pairs, equities, commodities, do backtesting, use it with real money, and even make mathematical calculations. If the system makes some losses, then they will change into a new one immediately, and repeat that loop. In fact, doing that constantly costs them a lot of time and effort, and probably they will end up without any suitable system.
The point is that they don’t actually know what a stable system is, and overreact to the losing orders. Communicating with lots of traders helps us figure out this common problem. At first, they were so happy finding out a good trading method and worked on it with belief that the system would make them lifetime profits as it had passed all the tests. After a period of trading, the system started to show signs of vulnerability; they got mad and then threw the system away, starting with a new one immediately. They remained stuck almost forever in this loop until they, either chose to quit with a huge loss or ended up with all their funds burned.
Actually, this trouble has been discussed on many trading forums and blogs. The best way to get through the problem is to review the stability of a profitable system and be patient with it when you realize that the system is truly profitable in the long run.
How to know whether it’s a truly profitable system or not?
In order to gauge a system, you must do backtesting honestly. Don’t try to avoid unprofitable occasions - never do it just to make the system look more effective. According to psychology, your brain will only see what it wants to see. Therefore, if you find out a system which seems effective, it doesn’t actually do. However, because you are highly interested in it at that moment, you will tend to look at it positively. When you realize that the extremely optimistic thinking of a system comes to your mind, eliminate it immediately and act on the defensive. Let’s wonder: “did I check the system honestly?” and keep this in mind when you are backtesting the system.
So, a system is considered truly profitable (in a long run) when it meets the following requirements: • It shows a substantially profitable result for a decent period (at least 12 months). • The system’s biggest drawdown doesn’t exceed 15% of the balance.
So, after you have found a truly profitable strategy, your next job is to trust it. Trust the system, because its profitability has been proven. Don’t turn away with it right after some losses appear. The binary options market is notably volatile, hence, there’s nothing called “100% win ratio”. Sometimes an order is wiped out by unexpected economic events or news. That couldn’t be calculated, so don’t blame your system. Just stick to the system as long as it meets the drawdown requirement, and soon you will see profits come and erase the suffered losses.
“Frankly, I don’t see markets; I see risks, rewards, and money.” – Larry Hite.