How do you lose money trading options on IQ Option? Many new options traders decide to join IQ Option to make fast money. Unfortunately, quick losses are more likely than quick gains. Options trading is simple right? All you need to do is guess whether the price of the underlying asset will go up or down and money will keep rolling in.
The fact is, there's nothing like easy money in options or any other type of trading out there. You are trading against other traders who want to take money from you. And n the sidelines is the broker who wants their cut regardless of who makes a winning trade and who loses.
The truth is, you're intended to lose money trading options. Unless you do something about it. But what can you do? Read on.
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What percentage of option traders make money?
Estimates vary here. It is also difficult to compare the percentage of earning investors at different brokers. This is because there are a number of different determinants. Even the type of instruments used matters here. IQ Option itself has 2 basic types of options: binary and digital options.
It is said that 70-80% of all traders lose money in the long run, i.e. on an annual basis. From this, it follows that 20-30% make money or do not lose money. That sounds pessimistic, doesn't it?
In the case of options themselves, it is even worse. Various estimates repeat that only just over 10% of traders make money on options. This is one of the reasons why options trading has been banned for individual investors in the US and EU. The regulators thus wanted to protect traders trading with their savings. This sounds very pessimistic. But let me tell you that most of those who lose do so at their own request. There are several mechanisms that correspond perfectly to our considerations today about how do you lose money trading options.
Do you understand digital options?
Options are designed to allow you to make money based on an underlying asset's price movements. You won't own the asset. You simply speculate that the price will go up or down by the time the trade expires.
What you'll make largely depends on the asset and the time you're trading. IQ Option will give you a percentage of your invested amount as profit. This is usually 70% and above.
That sounds too simple. So why do you still lose money trading options on IQ Option? Trading requires knowledge of not only how options work, but how to trade. You must learn to read price charts.
This way, you'll know when it's best to trade and when it's best to stay on the sidelines. Besides charts, understanding how several indicators work is another essential skill. Reading price charts and using indicators makes it easier to create a personalized trading plan.
Another important skill to learn is which assets are best for trading. For example, cryptocurrencies are best avoided if you cannot stomach ultra-volatile markets. And once you've selected an asset, you should also know when it's best to trade them. Many assets experience volatility after a news release.
In addition, the return on trade will constantly change throughout market hours. With these skills in hand, you're ready to start trading. But it's during the actual trading that you'll lose money. Here are two reasons why.
How do you lose money trading options on the IQ Option platform? 2 Reasons why
You don't know when to stop
Trading options can be exciting. But in the heat of excitement, you might forget one essential rule – when to stop trading. Without a trading plan, you'll not know when the best time is to stop.
Trading continuously can wear down your mind. As you lose your concentration, the probability of incurring losses increases. An easy way to determine when to stop trading is by answering two questions: How much should I make in profit before I stop trading?
How many successive losing trades am I willing to risk before I stop trading for the day?
Using too many strategies
The question about which strategy is the best is as old as trading itself. New strategies will always come up. But in truth, no strategy is superior to another. It's how and when the strategy is applied that matters.
Your objective should be identifying a trading strategy you're comfortable with. Then test it in the markets to confirm that it works. Find out in which market conditions it works best. Then use it to make profit. Using too many strategies leads to loss of focus. In turn, this will lead to losses.
Which route should you take when trading on IQ Option?
The path to successful trading on IQ Option is paved with knowledge, a solid trading strategy and patience. Let's take a look at your trading strategy and patience.
Creating a solid trading strategy
The best trading strategies are the simplest. I suggest you first trade a single asset using a single strategy (price action, trend following, 3 candles etc). Then decide which charts and indicators to use when trading your preferred strategy.
Why? This allows you to verify the validity of this strategy. For example, trend following only requires you to enter a trading position when you identify a clear trend. What this does is enable you to focus on reading the market's behavior.
Make sure to try out your strategy on the IQ Option practice account several times before using real money to trade. Next, decide on how much money you will invest in each trade. This is a subjective decision, but it's advisable not to trade more than 5% of your account balance on a single trade.
Patiently and religiously apply this strategy
One of the key skills you must learn as an options trader is patience. You must wait for the right conditions to present themselves before you enter into a trading position. This could be minutes, hours or even days.
Remember that your money is on the line. Trading just because the market “feels right” will only lose you money. For most of the time, you'll sit idly looking at the charts on your IQ Option trading interface. Waiting until the right conditions present themselves. That's all you need to do if you have a solid trading strategy.
How to minimize loss in option trading
Even high earning traders sometimes make the wrong investment decision. Sometimes it is a human error when executing a strategy in a trading plan. Sometimes everything goes according to plan, but the market does not go in the direction we expected. Both happen. When we make mistakes in strategy execution, we are to blame ourselves. If the market simply behaves differently than we expected, it is out of our control and we just have to accept it.
If you are experiencing one of these two situations, but your option has not yet expired, IQ Option gives you the opportunity to sell your option before expiration. Selling the option before expiry will not likely compensate you for the entire value of the option, but it will allow you to recall at least part of the amount you committed in the transaction. This is an opportunity to minimize the loss.
Define your objectives in options trading
Your first objective: Wait for the right conditions to present themselves
When trading on an IQ Option live account for $ 10, it might take several minutes or even hours before the right conditions present themselves. That's why I recommended you choose a single asset and trade it on the practice account first.
This way, you'll have a feeling when the markets are most favorable for trading. The good thing about this approach is that you won't feel emotionally pressured to trade. As such, you'll increase the odds that your trades will be successful.
Your second objective: Decide how much you want to make per day
When you have a specific daily profit target, it becomes easier to decide how much to invest per trade. For example, if your goal is $50, you can decide to trade 5 times with each trade making a $10 profit.
That means you'll be simply looking for 5 instances where the market conditions are right.
Now you are aware of why and how do you lose money trading options. There is nothing left to do but think about how to eliminate all the factors that make options trading difficult. Training on IQ Option demo platform will certainly help.
Thanks for taking the time to read this article. Good luck!
1 Response to "How do you lose money trading options on IQ Option? And how to fix that in 5 minutes"
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