Check below the list of the most common mistakes people commit when trading with signals.
Choosing a fraudulent signal provider
We listed this first because if you get this one wrong then all the other points below will be of little relevance anyway. If you choose a binary options signal trading provider that is fraudulent and is sending you fake signals to steal your money then no matter what you do or what strategy you use you will lose money.
Unfortunately there are quite some providers of this kind out there due to the fact that governments do not yet regulate this part of the business. However, there are also a very large number of completely legitimate service providers that can be trusted.
The best way of telling if a signal provider is legitimate or not is to check how long it has been in business. A scam provider usually is only capable of staying in business for a few months as after that the Internet would already be full with bad reviews and complaints, resulting in people avoiding the particular company.
Legitimate providers will obviously stay in the business for a very long time. Check out those copy trading providers that are in the business for at least a full year and have no bad press about them on major forums and websites.
Investing too much money per trade
Another mistake an overeager trader usually commits is believing that binary options signals are a 100% safe and secure way to make 100% guaranteed winnings all the time. Starting from this erroneous premise, a lot of naïve traders will invest very large amounts of money thinking that they are using a sure-win strategy.
The truth is that signal trading is not infallible and it may very well be that traders will end up having bad winning streaks on certain occasions. For this reason, it’s never recommended to invest large amounts of money per trade. Don’t be greedy. Take it slowly and enjoy the gains you make overtime and don’t try to treat this form of online trading as roulette or blackjack.
Misunderstanding how winning rates are calculated
Following up on the previous point, another similar mistake is not to understand how the winning rates are calculated. For example, a signal trading provider might promise a winning rate of 80%. This does not mean that every single individual trade you make will have an 80% winning chance.
Winning chances are averages calculated based on a large number of consecutive trades executed. For example, if you execute 100 trades from which you win 80 and lose 20, your winning rate will be 80%. In other words, this number is a rate calculated long term on multiple trades.
This rate also can’t be applied when it comes to a small amount of trades only. Even if a binary options signal trading service provider promises a winning rate of 80%, it won’t mean that if you do 10 trades you will definitely win at least 8 of it. These rates are calculated taking in consideration longer periods of time and a large number of trades (at least 100+).
This is the reason why we said earlier that under no circumstance should you invest very large amounts of money on individual trades. If you use the signals sent by a serious provider then your promised winning rate WILL be matched on the long term and you WILL make profits. But if you invest too much too fast, you might lose all your bankroll and go bust.
Consider the following example:
– Assume that you executed 200 trades and got 180 correct picks
– Now, it might also be possible that the 20 incorrect picks were the very first 20 trades you made; after than you got 180 straight winning trades
Sure, the example above is overdramatized a bit, but it’s so that you can get the point: Winning rates are averages calculated taking in consideration a lot of trades over a long period of time. Nothing guarantees immediate success 10 minutes after you sign up at a signal provider.
Not following all signals provided
A very serious mistake people make is to skip on certain signals for various random reasons. If you have signed up for a signal service provider and have paid the (usually fairly large) fee, then you should be determined enough to take this seriously and follow all instructions to the letter.
This goes along with the previous segment about winning rates. Service providers’ winning rates are calculated taking in consideration all of their signals generated. You will only achieve the promised winning rate if you act on all signals that you receive.
If you skip acting on certain signals then your winning rate will obviously be completely different than the winning rate actually promised by the service provider. Sure, it’s awesome when you accidentally skip the losing trades, however it’s not so awesome if you accidentally skip the winning trades and then completely mess up your winning margin.
Seriously, we have to say this again, if you paid like $100 for a signal service (plus the deposit made at a broker), then better be serious about it and act on all the received signals. If you won’t, then your actual winning rate will obviously not be the same as the one promised by the service provider and you will then go blame the service provider and accuse them of cheating you.
Acting too late on signals
And yet another mistake many people do is acting late on signals. Signals are usually generated right before the predicted event is about to take place. So, for example, if a signal predicts that the price of gold will increase then this prediction is expected to happen the next 5 minutes to 1 hour or so.
Obviously, if you act late on the signal then the signal will be completely worthless as it referred to something that already happened in the past. So, if you receive your signals through email then better have your email client open all the time or if you get them through SMS then have your phone by your side at any moment.
Giving up too early
A lot of people who experience some early setbacks often give up too soon. Like said in one of our earlier points, winning rates are calculated taking in consideration a series of many trades over an expended period of time. As such, occasionally in the short term you will experience losses as well.
However, these should not discourage you and you should always know that if you followed all the signals right and didn’t skip any of them, then in the long term you WILL definitely make profits. Likewise, again we have to repeat that this is why it’s so important that you should always invest low amounts of money on individual trades. If you go bust in the short term, you obviously won’t make money in the long term.
Not trading with the same amounts of money
An issue almost no one knows about in this business is that you should not invest different amounts of money on individual trades. If you do this, your winning rate (the percentage of successful trades) will obviously stay the same however this does not mean that you will actually make profits.
Even if you got 80% of all your predictions right, you can still actually lose money if you invested $5 on your winning trades and $50 on your losing trades. This is why it’s very important to always use the same amount on all trades that you execute during a given time frame.
If you just randomly make investments with different amounts then the winning rate itself will be a completely useless metric when measuring profitability. Like said, you may even win 90% of the time but you can still actually lose money if the money invested in the 10% losing trades was several times larger than the money invested in the winning trades.
Sure, you can of course change the amount you invest at any moment, however if you do then you should stick with the new rate for a fairly large amount of time until you change again.
So, as you can see, binary options signal trading is actually not that simple, as many people would imagine. Yes, this from of trading was invented in order to make binary options trading much more simple however even so you will still have to put some effort into it and follow all the related rules and guidelines.
If for any reason you thought that signal trading in binary options is just something you sign up at and then you instantly become rich (unfortunately this is the image portrayed by a lot of unscrupulous service providers and websites) then you will get disappointed very fast after you managed to lose all your money.
Always remember to take things seriously and if you commit yourself to something then fight for it until the end. Don’t be reckless, don’t be greedy and don’t let yourself be fooled by unscrupulous providers promising you riches that can be earned without any effort. Binary options and signal trading can be extremely profitable indeed, however you have to be smart about it. Check out our additional articles for further winning tips and strategies.