Trading Psychology Glossary

Plain-English definitions of 15 trading psychology and behavioural finance terms — with specific explanations of how each one affects binary options traders.

Trading Psychology

Revenge Trading
Placing impulsive trades immediately after a loss in an attempt to recover money — the fastest way to turn a b…
Overtrading
Placing more trades than your edge justifies — eroding profits through excessive frequency even when each indi…
FOMO Trading
Fear of Missing Out — entering trades driven by anxiety about missing a move rather than by a valid setup, alm…
Emotional Trading
Any trade entered or exited based on feelings rather than pre-defined criteria — the umbrella category that in…
Analysis Paralysis
Overthinking a trade entry to the point of missing it — caused by adding too many indicators or seeking perfec…

Behavioural Finance

Loss Aversion
The documented psychological phenomenon where losses feel 2–2.5× more painful than equivalent gains feel pleas…

Trade Mathematics

Risk-to-Reward Ratio
The ratio between what you risk on a trade and what you stand to gain — and why binary options' fixed payout s…
Kelly Criterion
A mathematical formula that calculates the optimal position size based on your edge — and why it produces spec…

Risk Management

Martingale Strategy
A progressive staking system where you double your bet after every loss — theoretically guaranteeing recovery,…

Habit & Process

Trading Journal
A systematic record of every trade you place — the single most important tool for improving binary options per…

Core Principles

Trading Discipline
The consistent application of pre-defined rules regardless of emotional state, recent results, or the temptati…

Cognitive Biases

Recency Bias
Over-weighting recent events when making decisions — causing traders to extrapolate winning streaks, abandon g…
Confirmation Bias
The tendency to seek, interpret, and remember information that confirms a belief already held — causing trader…
Anchoring Bias
Over-relying on the first piece of information encountered (the 'anchor') when making decisions — in trading, …
Sunk Cost Fallacy
Continuing a losing course of action because of resources already committed, rather than evaluating the curren…

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