Money management Binary Options 2020

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Money Management

Money management is a vital element of trading. When applied to a high risk, high return form of investing such as binary options, it becomes even more important. Here, we explain the basic concept of money management, before expanding on the subject further, and exploring wider money strategy.

Basics Of Money Management

Money management and risk control are key for successful trading. When I say key what I mean is that money management, as a form of risk control, is how you protect yourself from yourself, how you eliminate (to the extent you can) fear and greed, how you ensure you never wipe yourself out of the market and can always come back to trade again.

It is the process of managing your total investing capital. Most people will understand that risking the entire sum in one trade is a bad idea. Likewise, many people will understand why ‘portfolio’ management includes allocation and diversification elements. Similar principles apply when managing a binary options bankroll.

Beyond those more obvious benefits however, are the ways it provides more subtle help for traders. The ability to make decisions with more clarity, the security of knowing there will be money to trade with in future and the knowledge that growth will lead to further growth without any increased risk or planning.

There are many ways to do it. Money management – true money management – is a method to control risk while allowing you the freedom to trade, and for profitable positions to make as much money as they can.

Strategies

The most widely used method of money management is called the Percent Rule:

Percent Rule

The Percent Rule says that each and every trade is always X% of your account. Cautious traders may go as low as 1%. Riskier traders may go as high as 5%, but regardless the amount it is always the same. There are a couple of reasons why this system works so well, and why so many traders like to use it.

  • It takes the guesswork out of trade size and is crucial in terms of trading psychology. There is never a question of how much should this trade be or letting your emotions make decisions for you. A fearful trader may make a trade that is too small even when the signal is really good, an overly confident trader may make trades that are too big, even when the signals aren’t great. This method leaves your mind free and clear to focus on what is really important, the signals and how to trade them.
  • Using a percent rather than a set amount means that the size of your trade will grow, or shrink, with your account. This means that if you have a losing streak you will make successive smaller trades. No one trade ever large enough to wipe you out and no losing streak so bad it will wipe you out either. On the flipside, as your account grows so to will the % you trade so that your profits will grow too. An amount like 5% may seem small when you are trading $20 to make $36 but it’s no different than trading $2000 to make $3600, if that is what 5% of your account is.
  • The Percent Rule doesn’t so much boost confidence as removes an obstacle that may shake what confidence you already have. At the same time it keeps your account safe long enough to gain some experience, and by extension the confidence that comes with achieving a goal. When it comes to trading, confidence is what pays the bills, anyone can spot a signal but only a confident trader will trade it and be able to walk away without spilling a tear if it loses.

This is how it works. If your first deposit is $500 then a 5% trade size is $25. To keep things simple I would trade $25 until the account was $550, then the trade size ups to $27.5. If you lose then the account falls to $475 and you reduce your trade size. In this case that would be $23.75, if your broker doesn’t let you enter pennies into the trade amount then I would round down rather than up to err on the safe side.

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When it comes to adjusting your trade size it is just as important to raise it as it is to lower it, you don’t want to cut yourself out of profits you should have made by trading only trading 3% or 4% of your account when you should have been trading 5%.

If you become emotional over losing money and decide to recoup those losses by trading larger and larger sizes (e.g., a Martingale-like strategy), you will inevitably crash and burn eventually and end up with nothing. Martingale strategies have permanently ended many trading careers.

You will find that many of the best traders in the world scoff at the Martingale concept and for good reason. They never turn out pretty and fundamentally restrict the maximum trade size you can make. For instance, the current maximum trade size on 24option is $20,000, but investing $1,000 per trade would be imprudent in that you wouldn’t be able to sustain more than four losses in a row before you would no longer be able to recover those losses (and be $31,000 in the hole assuming a simple double-up type of Martingale).

Systems

While it’s important to set personal rules (e.g., trade only with the trend, no more than three trades per day) and attainable short-term goals (e.g., achieve an ITM percentage of 60% or higher), which may differ from those of other traders, I feel a big mistake is to set a monetary goal that must be met by a certain date or, worse yet, every single day.

It is very difficult to become emotionally detached from your trading when certain profit goals are wrongly taking priority. I used profit goals when I first began trading, and I found that they were nothing but a distraction that led me to make bad trading decisions and losses I could have avoided.

Calculator

Calculating your risk in binary options is actually very easy. With the 5% rule, for every $1000 in your account you can afford to expose $50 at any single time. This means all trades are $50 until you begin to win or lose and have to make an adjustment. So, after reading this your first step is to identify and sign up with a broker that will allow you to place trades within the confines of your acceptable risk appetite.

The calculation needs to be based on your appetite for risk too. A 5% plan is fine, but is probably still at the higher end of the risk scale. A 1% per trade strategy will reduce risk even further. This might be helpful for those just starting out in binary options. As noted above however, the minimum trade size available with your broker, may dictate the smallest percentage you can trade with.

Possibilities Of Binary Option In 2020: Is Trading Worthy Or Not

If you want to become a professional trader on binary option in 2020, then this blog will help you to know more about this trading world. We designed the whole blog with updated news of binary worlds along with the previous history.

The leading attracting part is that we will show the top profitable brokers and automated trading application that generates profits.

On the other hand, we are working on educating our traders globally with trading guides and binary strategies . Furthermore, novice traders need to increase their experience level, as they are newly entering the financial industry.

Let’s start with a brief introduction to binary options and the trading process.

What Is Binary Option:

A Binary Option is an exotic trading type that simple and profitable for traders. The financial instrument allows traders or investors to predict the future price of an asset.

At the same time, you can consider binary options trading is a new form of making money online . However, there are several ways to generate money from home but, this particular trading type will add more value to get profit.

As there are no fixed rules or magic wand for traders, so you need to understand the market to trade profitably.

Binary traders already know the return percentage before placing the trade. Additionally, in options trading, the outcome will depend on your correct prediction.

If you are completely new to the binary world, you can read what is binary options article, to know the basics of options.

History Of Binary Options

To know the origin of Binary Options, you have to go through the history of this trading type. In 2008, binary options were first introduced publicly as a tradeable asset. Binary Options was approved by the Security Exchange Commission (SEC)

Before that, in 1974, the Chicago Board Options Exchange (CBOE) was officially launched binary options.

Besides, 2008 is a memorable year for traders because in that year a lot of symbolical financial stability collapsed one by one. So, traders took this trading type as a low-risk investment at that time.

Fortunately, at the same time, it gained popularity among people as there are no additional alternatives.

In the same year, people can trade publicly binary options on the American Stock Exchange (AMEX). After a few years, people consider the binary option as the semi-investment product. So, at that time, it was only open for banks, other financial institutions, and over the counter marker.

A few months later, some trading platforms were introduced such as 24option . Until then, the regulation was not an essential part of traders. However, at this moment, people are more likely to use a regulated broker rather than a deregulated broker.

On the other hand, in the year of 2009, the first binary options exchange came into the market whose name was Northern American Derivatives Exchange (NADEX).

After a while, CySEC classified binary options as financial instruments in 2020. But, unfortunately, a joined investor alert was issued by the CFTC and SEC, in the year of 2020.

From 2020 to 2020, Binary Options faced a lot of problems in the different regions due to the weak regulation. Fortunately, history does not disappoint yet and the industry got active traders almost the same as Forex Trading.

Best Binary Options Money Management Strategies

Updated on: 6 January 2020

An efficient winning strategy in binary options also contains money management. The money management part in binary options is not a strategy that will help you predict the movement of certain assets. It’s 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 this. 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 a lot 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.

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Most Efficient Money Management Strategies

First of all we’d like to reiterate the issue about discipline. Sure, you will be trading with your own money and as such you can do whatever you want, however if you’re really committed towards making money in binary options then you will have to have 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.

Number of wins & number of losses

This is one of the most common money management strategies in binary options. 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 10 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 10 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 10 (usually never happens but we overdramatized it for the sake of the example).

This way if you have lost 10 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.

Percentage of losses

This is basically the same as the above-mentioned example only in percentages. However, this money management strategy is more permissive because it 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 20%. 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.

Amount of wins & amount of losses

This strategy is also very similar to the first one with the only difference being that you propose to win a maximum of $X per day and not lose more than $Y 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.

Number of trades

This strategy requires you to stop trading after you have executed a certain number of trades regardless of the outcome of those trades. You can also combine this strategy with any of the above.

Winning ratio

And the last binary options money management tip is to watch your winning ratio. If this winning ratio drops below a certain level, such as 80%, you should stop trading. You will have to calculate your winning ratio after each trade you execute. The best thing to do is to use an excel file for this purpose.

Risk Level Strategies

Now you might be asking what the best percentages and ratios are in the case of the above-mentioned strategies. Like, what’s the best minimum winning ratio, for example. This will depend on the risk you are willing to take.

Below we have established the recommended rates and percentages for the above-mentioned strategies taking in consideration the risk level you are willing to take.

Low risk strategy

A low risk binary options money management strategy is for those who do not wish to take high risks. This will result in fewer profits but generally few or no losses at all.

Number of wins & number of losses

– Stop trading after 10 wins

– Stop trading after 4 losses

Percentage of losses

– Stop trading after 8% losses

Amount of wins & amount of losses

– Stop trading after $50 profits

– Stop trading after $25 losses

– Stop trading if the winning ratio becomes lower than 80%

– Stop after 10 trades

Medium risk strategy

The medium risk money management strategy is for those who would like to earn some extra money but still aren’t 100% sure if they want to go all in.

Number of wins & number of losses

– Stop after 30 wins

– Stop after 10 losses

Percentage of losses

– Stop after losing 15% of your contracts

Amount of wins & amount of losses

– Stop after winning $150 in a session

– Stop after losing $50

– Stop if your winning ratio becomes less than 75%

– Stop after 50 trades

High risk strategy

The high risk strategy is for those who are not afraid to lose large sums of money with the prospect of making huge profits fast. This risk assessment binary options strategy is only recommended to experts.

In this case, we’ll be allowing for a bit more flexibility and have defined the limits a bit loose (defined by the + sign).

Number of wins & number of losses

– Stop after 100+ wins

– Stop after 30 losses

Percentage of losses

– Stop if you lose 25% of your trades

Amount of wins & amount of losses

– You are already an expert, so you do not need a maximum win amount limit.

– However, stop if you lose more than $100 in a session

– Stop if your winning ratio drops below 65%.

– You can trade as much as you want, however in this case choose another limit from the ones mentioned above.

General Tips and Guidelines

There are also some general tips and guidelines 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 (but still in the range of the ones mentioned by us.)

In the beginning and if you are a newcomer you should still strongly consider using the limits written above in the case of the low risk strategy though. Later on you may establish your own limits by slightly modifying the ones mentioned by us.

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.

Another suggestion is that you may combine two or more of the above-mentioned limits. For example, you may propose to not lose more than 10 trades per day and not trade more than a total of 50 trades.

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.

And this is all we have to teach you in this binary options strategy article. 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.

If you want to learn more about how to win in binary options and binary options strategy then feel free to browse though out additional articles. And like we always say: trading binary options successfully doesn’t depends on luck, it depends on commitment and discipline.

Best Binary Options Brokers 2020:
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  • BINOMO
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    2nd place in the ranking!

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