For those of you who are new to this concept, let me clarify what Binary Options Trading actually means. In the simplest form it’s basically is a type of option which only has two possible payoff outcomes either some fixed percentage monetary amount or nothing at all. There is of course an element of risk but once handled systematically it can be a real money income. That’s exactly why we have to ‘manage’ our money accordingly. Let’s see how money management in the Binary Option trading arena works.
The biggest focus you should have pertaining to Binary Option trading and money management is not to take unnecessary risks by using up most of the money you have available in a single trade. I know that the potential rewards are tempting, but trust me on this. Play safe and in the long term, your account will continually grow and you won’t end up completely broke like most of the people who took those unreasonable risks. Even the best of the binary signal systems are wrong a small percentage of the time.
Percentages are Important
To compensate for this, there is a simple steadfast rule: Never use more than 5% of your account. No matter how sure you may be, stick to the rule. While most professionals will go as far as to say that 2.5% is the maximum limit. Many believe this is the wiser course of commitment when you have a high risk of money loss, such as all or nothing. Our suggestion which follows is to be on the lower side of that spread adjusting your investment slightly upwards every two days as percentages allow.
Furthermore, there is another important and very popular strategy when utilizing known winning Binary Option Systems in the course of any trading session. Never overtrade; wise traders decide on trading plans before making the first trade. It is called ‘Limitations on number of Wins and Number of Losses”. How does it work? The simple approach is every trader needs to limit themselves or stop when they have reached a set amount of wins or losses. For example, you can set a limit of 10 wins and 3 losses. After 10 wins, YOU WILL STOP. It is better to have a 100% winning day and place fewer trades. This is because, a number consecutive wins can get a person to become very over-confident and tempt them into making bad decisions and risky trades. It has an unfortunate side effect of ruining what was a perfect winning day and changing the trader’s mindset. Trust me; this emotion is very strong and if you haven’t dealt with it yet, don’t give it a chance. Also it takes two trades to make up one losing one. Trading should be fun, which too is a rule that is more important than you imagined. Similarly, STOP when you reach 3 losses. This will prevent you from over loss again. Some days are just not good trading days. Do not chase the market, you always lose. While that may not sound logical or professional, successful trading works that way.
Limitations when trading
These limitations vary from person to person, system to system, so experiment and design your own. Those that make a rule and stick to it are the ones that end up making real money gains every week. If you are using a known winning percentage system you can plan effectively.
The following is an example of strategic money management which explains some of the above listed points, and can easily get you a large return in a few weeks:
Let’s start off with $500. This means you will start investing, only $10 at a time, according to our risk policy. In this example a payout rate of 70% on the trades, one of the lowest offered. If you do the numbers you will find it pays better to trade options with higher payouts, the risk is the same. Let’s suppose you increase your total by $7 on your first win, making a total of 15 wins and 3 losses (with risks added) to give you $54 on your first day. (You won $84 and loss $30)
Trading with good win ratio
If after two days your win ratio stays over 70% increase your investment by $5 a trade. This stays in line with the 2.5% risk allowance. Following this strategy over the week will produce a grand total of $878 in your account after the week finishes. A very nice a return accomplished in a short time. This makes it the perfect safe money management practice. Continue this process and over two weeks, your $500 dollars will have turned into $1500 dollars! By just practicing wise money management imagine the money you can make in the first month. All things being equal your account balance will have reached almost $4000. Take note there was no mention of winning millions of dollars here, this is realistic.
Although a few changes might occur according to the win/loss ratio, but using the limitations, you can be right back on track in no time. Never forget that using a known winning percentage Binary Option Systems along with money management strategy is essential in becoming a winning trader.