It is just as important to be able to identify a low quality binary options trade as one of high quality. Knowing when to trade and when not to is one of the keys to being able to generate profits on a regular basis. There are several different factors that can signal a poor trade and once you know how to recognize these, avoiding trades which carry a higher loss potential will be easy.
When trading binary options, traders can profit from all types of market conditions. Because of this, many believe that there is no reason to avoid any trades at all. Even though any type of market condition can yield profit, the truth is that sometimes price forecasting is easy and sometimes it is not. There is no reason to experience the frustration that comes with difficult analysis when there are opportunities that allow for an easier prediction process.
For all trade types except Boundary and No Touch, asset price movement is going to be required in order for the trade to finish in the money. However, a change as small as one pip (in the direction you selected) is all that is needed for the contract to be profitable. Price volatility is something that is often feared by those who trade within the conventional marketplace, but for those who trade binary options, the overall range of price movement is much less important.
What you do not want to see is price movement that is bouncing, moving up and down with no clear direction. Mixed emotions coming from investors within the marketplace can cause this to happen. With this type of price action, an accurate forecast of the upcoming direction of movement is going to be quite difficult. Range-bound prices make for difficult forecasts as well. These prices are changing very little, and you certainly don’t want to lose a trade when the price moves just one or two pips against you.
Certain contract time periods, or expiry times, can also be poor choices under less than ideal market conditions. One example would be entering into a one-hour trade just as some major market data is about to be released. Any news that is likely to impact market sentiment is also likely to impact asset prices. While your price movement forecast might have been accurate prior to a data release, once a shift in sentiment occurs any analysis that you have performed previously is likely to be useless.
Traders can personally be responsible for losing money on low quality trade if they allow emotion to play a role in the decision making process. Never guess at price movement. If you do, the odds of earning a profit decrease substantially. There will be plenty of highs and lows along the way and it is difficult not to become emotional whenever money is involved. However, with some practice, detrimental emotions can be pushed to the wayside while you analyze and execute your binary options trade each day.