The Role of Optimism in Trading

The Role of Optimism in Trading

optomisitcWould you describe yourself as an optimist, a pessimist, or a realist? You may be tempted to answer that you’re an optimist because that is generally considered the “best” answer. Pessimism is seen as a bad thing (and it generally is), and realism is sometimes seen as a somewhat cynical middle ground (or even a code name for pessimism) by those who like to think of themselves as optimists. Optimism not tempered by realism can be quite dangerous for a binary options trader, however. Then again, realism can be too if it isn’t bolstered by at least a little positive thinking.

Unrealistic Optimism: “Do What You Love and the Money Will Follow”

This is one of the most popular pieces of advice from motivational speakers and writers around the world, and even from life coaches. Most of us were raised with aphorisms like, “Follow your dreams,” or have been told to, “Visualize your success and it will happen.” While all of this may sound great on the surface, and the people who espouse them may actually believe what they’re saying, more often than not, that is because they have gotten very, very lucky in their lives. They have never stood where you are now. They are unaware of your exact circumstances, and their rampant optimism is not suitable, nor is it appropriate. Why? Because it is unrealistic. Wishing for something will not make it so. Otherwise you would have won the lottery by now and have no need for binary options trading!

Why is this advice particularly disastrous for a trader? Think about the marketing campaigns that have been structured around it. There are a lot of hard-sells out there directed at novice traders, and all of them are based on the premise that you can succeed easily and quickly, even if that is not realistic. These marketing efforts are capitalizing on the unrealistic hopes and dreams of newbie traders who have been told that if they just believe in their success, they will achieve it.

But just because you believe in that system you paid hundreds of dollars for does not mean it will perform for you. Just because you believe in that signal system you are paying $200 a month for does not mean it will deliver. Just because you believe you can make it big by putting all your money on “up” or “down” does not mean that you will win. In fact, if you believe all of these things, you are more likely to lose. You will lose not only your investment, but also all the money you have put into purchasing systems, coaching programs, signal services, and other trading products.

The Problem with Pessimism

At the polar end of the scale from unrealistic optimism is pessimism. Pessimists tend to notice all the bad things that happen and not the good things. They usually emphasize those bad things and underreact to the good things. They believe that the bad events have clearly identifiable and likely repeatable causes, but that the good events are just coincidental and are unlikely to happen again.

Pessimism is a disastrous attitude for a binary options trader. As a trader, after all, your very goal is to find a way to generate repeatable wins! You have to be able to identify the good things which are happening and replicate them. A pessimistic trader will be faced with a real struggle when it comes to putting faith in a trading system. And without at least a little faith, you are not going to make it. If you cannot trust your trading method, you will trade arbitrarily, and you will lose more often, and then wonder why nothing good ever seems to happen for you. It is a self-defeating attitude.

Binary options trading poses a particular challenge when it comes to cultivating optimism because it is almost impossible not to be more affected by your losses than by your wins. Think how you feel when you win $2,000. You probably feel pretty awesome—but how do you feel when you lose $2,000? The devastation can easily outweigh your feeling of victory. That is true whether you are a pessimist or not.

If you are an optimist, you will have an easier time detaching yourself from the devastation of the loss, even if you feel it strongly. Why? Because you will not believe that failure is the rule, despite the loss acting as evidence. Whereas the pessimist may be tempted to minimize his wins, you will not be fooled into thinking that your wins have all been accidents. Once again, you will find it easier to trust that good things can happen to you, which will help you move forward. As a pessimist, a loss like this can cause you to freeze, because you may see no hope for your future trades.

Is Realism Enough?

Realism is in theory the perfect middle ground between optimism and pessimism—but is it really? Is it the right attitude for a binary options trader?

First of all, we have to define realism, and that is a surprisingly hard thing to do. If a pessimist is someone who anticipates unfavorable outcomes, while an optimist is someone who anticipates a positive outcome, a realist is in theory, “a person who tends to view or represent things as they really are.”

That definition sounds great, until you start to look at it more closely. Who is to say what things really are? Nowhere is this more of a problem than in a field like binary options trading, where you are facing astounding levels of uncertainty every single day. A realistic may think he or she is seeing things as they really are, but no one can really see what is going on at a given moment when unknown factors are involved.

In order to decide how things “really are,” a realist must project forward from past experiences while taking careful stock of present conditions. But even this must involve a fair degree of subjectivity. Past experiences are not always indicative of future successes or failures. Why? For one thing, as a trader, you are learning and growing all the time, and your past experiences will necessarily be replete with failures! Those are building blocks for your knowledge and growth. Since you are different going forward, you cannot expect the future to reflect the past. And if you do, you will project failure—which will actually make you a pessimist, not a realist. Worse, you may still believe you are being a realist, and as a result, truly believe in all of your pessimistic projections.

So perhaps with binary options trading, realism is not enough. There are too many times you will face failure along the way, and if you believe that these failures represent your future, you will begin to believe in that negative future, which will generate a cascade of failures instead of improvements. Worse, you may actually get so stressed by the prospect of ongoing decline that you wash out as a trader and quit altogether. And again—one of the worst mistakes you can ever make as a trader is assuming you know what is going on all the time. In that sense, realism is just as flawed as optimism and pessimism. It is built on false assumptions about the present and future. So what mindset should you choose instead?

Realistic Optimism

Realistic optimism is the best mindset for a trader. As a realistic optimist, you believe that you can succeed, and you know that your actions play a role in that success. You know that you can repeat positive outcomes, and that there is an explanation behind the positive events that happen to you as a trader. But you do not believe that explanation to be supernatural nor necessarily indicative of improbable events. The markets are not going to reward you for being a positive thinker, and neither is the universe. You also have to be a positive doer, and yes—you need at least a little bit of luck on your side.

What you do not believe as a realistic optimist is that you can succeed with ease. You acknowledge that there is nothing automatic about success, and you also acknowledge that repeat failures are to be expected in trading, whether you work hard or not. But you also recognize that you can reduce the occurrences of those failures if you have a solid trading method that you can rely on. Sometimes that may feel like doing what you love, while other times it may just feel like a tedious challenge. Odds are, the real path you take toward success will be quite different from whatever you have visualized in your head. You do not know the future. Your past experiences can teach you lessons about what to expect, but the markets are always in flux, and so are you. That means conditions are always changing.

A realistic optimist is able to bring the best of both worlds to the table, and leave the flaws of both optimism and realism behind.

  • Your optimism helps you to find the strength and perseverance to forge ahead on those difficult days when you cannot see a clear path.
  • Your realism keeps you from panicking when the road is rocky, by preparing you to meet that challenging road and equipping you for obstacles.
  • Your realism reminds you that it is not enough to believe in yourself; you must also take the necessary actions to grow as a trader. Right now, you are not yet the binary options trader who will ultimately succeed. You are just in the beginning stages, and you have a lot of transformation ahead of you. Believe the person you are now can become greater, but acknowledge you must leave behind the novice to become the expert.

The key to keeping both realism and optimism in balance is to remember that you never know what is going to happen, and that is okay. You do not need certainty to thrive as a trader or as a human being, even though uncertainty can be scary and frustrating. As human beings, we excel on voyages of discovery, and binary options trading can be quite the adventure. It can be a scary one at times, and you will stumble along your path in ways that can be devastating. But that does not mean you cannot succeed or will not succeed.

On your binary options journey, realism keeps you from walking off a cliff and pretending you see a path when there isn’t one, but optimism keeps you from turning back when it is dark and you cannot see clearly. So be a realistic optimist, and you will maximize your chances of success!

Test out your realistic optimism at OneTwo Trade today!

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