Money management in binary options
Most important issue beside binary options strategies and which broker is fits my needs is money management. Money management is a big topic, a strategy that will help you manage your assets well in order to achieve your desired profitability ratio. Money management is generally ignored by most binary options traders. This is because they believe that it’s enough to be able to predict the movement of the assets and everything else will follow automatically after. However, if you don’t have the necessary discipline in order to manage your finances you might actually end up losing money rather than winning.
A good binary options money management strategy basically has two main parts, which are taking some risks as well as having the discipline to abide to the rules that you have proposed in your money management strategy. There are lots of binary options money management strategies available. Below in this article we tried to outline most of these strategies. Based on your trading style and goals you may decide yourself which strategy you’d like to use.
First of all we’d like to reiterate the issue about discipline. Sure, you will trade with your own money and as such you can do whatever you want, however if you’re really committed making money in binary options then you will have to be discipline and follow the proposed strategies to the letter.
Below we tried to compile a list of the best binary options money management strategies. We won’t tell you which strategy to use, however after reading the below descriptions you will be easily able to find the strategy that best fits your needs. The below strategies focus on establishing various minimum winning or maximum losing requirements and limits. The idea is that once you reach the proposed limits you will have to stop trading no matter how much money you have won or how much money you have lost.
1. Percentage of losses:
This money management strategy won’t limit you according to the number of trades won. Instead, this strategy calls for you to stop immediately in case a certain percentage of your trades are unsuccessful. For example, you may propose a percentage of 15%. If you’re good, you may only reach this percentage after 100 trades or never at all. However, you may as well reach this percentage after 10 trades after which you should stop for the day.
2. Number of wins & number of losses:
This is one of the most common money management strategies in binary options trading. If you use this strategy, you will have to propose yourself a daily total number of wins or loses limit. Once you reach one of these limits you will immediately stop trading. For example, you may propose to win a maximum of 5 times per day. Once you have reached this limit you will stop trading. This is because it may happen that you may get caught up in the heat and enthusiasm and may become reckless in the process of purchasing new contracts. This is a common psychological reaction among financial traders and you should not underestimate it. Likewise, you should also propose a maximum loss requirement. If, for example, you have lost 5 trades today you decide to stop no matter what. This is because if you just propose a maximum winning requirement you may as well lose 100 trades before you win 5. This way if you have lost 5 times during the day, you will stop trading no matter what. This will prevent you from running after your money, something that’s also a common psychological phenomenon observed among financial traders.
3. Amount of wins & amount of losses:
This strategy is also very similar, with the only difference being that you propose to win a maximum of $ per day and not lose more than $ per day. If you reach one of these limits, you should stop immediately. For example, you may propose to win a maximum of $100 per day and not to lose a maximum of $50 per day. Once one of these limits is reached, you should stop trading immediately. We know it’s hard to stop when you have unfortunately lost but please do not run after your money, it will make things worse since most people are very emotional in these situations. Trading online is about being rational and objective.
There are also some general tips when it comes to the money management strategies mentioned above. The first is that you may also naturally use different numbers and percentages than the ones listed above. At the beginning and if you are a new binary options trader you should still strongly consider using the limits written above in the case of the low risk strategy though.
However, no matter what kinds of limits you use you should always have the discipline to stick to those limits no matter what happens. This is one of the most important things to keep in mind. The rule in this case is that you should stop trading whenever one of these conditions is met. For example, if you have lost 10 times but you only traded 20 times you should stop, even though you also proposed to trade a total of 50 trades.
Remember, a proper binary options trading money management strategy is essential in becoming a winning trader, so this guide is perhaps one of the most important pieces of advice we can give you.
Thank you for reading our Money management article and please USE IT! For more information or questions please contact us or leave a reply below. If you are new to binary options trading you must trade with an EU regulated broker like Markets.com with a minimum initial deposit of $100 only! OR you can visit our trusted brokers list and start trading with a safe & reliable broker. Due to the legitimate willing to increase your monthly income you can combine your trading method with a reliable signals service.