Risk Vs Reward
Risk vs. Reward Trading Binary Options
Risk and rewards are two sides of a coin when it comes to trading binary options—or any other type of trading, regardless of the form it takes. If you’re going to invest, you’re going to risk. You have to risk to win, but if you don’t monitor and control your risk, winning is impossible. Many people think that they can just ignore the risks of trading binary options and become successful, while others think that they will never be successful consistently in an enterprise that involves so much risk. Neither of these attitudes is healthy, however, and it is only by acknowledging and balancing risk in your binary trading that you will achieve reliable profits and success.
Thinking About Risk – What is More Risky? Taking A Risk Or Not Taking One
If you’re deterred by the idea of dealing with risk, and not sure whether trading is acceptable because of the risk, think for a moment about any other business. If you were to open a restaurant or a store or start selling a line of merchandise, wouldn’t you be risking all of the capital you put into those things in order to try and profit? There is no business on earth that isn’t speculative to some degree. Binary options trading is no different.
Risk is something you must learn to respect; you can overcome your fear by learning skills like money management and by testing your strategies before you trade real money.
Money Management Is Key To Long Term Binary Success
Money management is simply how you manage your bankroll with your trades. Most successful binary options traders only invest a tiny percentage of their account with every trade. You must choose an amount that is reasonable and that you can stick to consistently. How you manage your money can be a deciding factory in whether you become profitable or blow your account and bust your bankroll.
What percentage of your bankroll should you invest in any given trade?
1-2.5% of your total bankroll should be invested in any given trade is the amount many successful traders would give.
What kind of starting capital should I begin with to be successful
This is a difficult question because your total trading capital should be different than the amount you deposit at any given broker. Find a broker you like and make a deposit you are comfortable with. If that is the minimum deposit amount then so be it. Trade the minimum amount they allow any given trade to be taken at unless you are comfortable making another deposit. You also need to consider if you want to take a bonus offer or if you want to avoid those because of the terms and conditions for releasing the bonus and being eligible for withdrawal.
Developing A Method To Your Binary Trading Reduces Your Risk
You also to develop a method for trading binary options that you are comfortable with. This method can be based on fundamental or technical analysis or on price action, or even on a combination of these techniques. The point is that you need to be comfortable with it. If you just make one to two trades per day, and wait for the right setups to make the trade then you very well could make more money than those very active traders who are making tens or dozens of trades each and every day.
There are literally endless ways you can learn to make money consistently from trading, but one sure way to lose money is to go in without a method that you’ve tested on historical and current data. Do your backtesting and demo testing before you think of going live. One of the best ways you can mitigate your risk is by removing as much of the randomness out of the equation as possible. A method that is proven to work consistently over time is one way you can do this.
Trading binaries means accepting a certain amount of risk, but also working to minimize that risk as effectively as possible. Running away from risk will not help you to succeed, but you do want to reduce your risk and use a proven strategy which you know will work over time. Keep in mind however that no system is infallible, and your method will need to be adapted to changes in your market as time goes by.