What Makes Success? Capital Or Skill?
Binary options traders run a pretty wide range as far as starting capital goes. Considering though that a lot of binary options brokers cater specifically to traders with very small accounts ($200 to $250 being a standard minimum deposit), there is a good chance if you are reading this that you do not have a large account yourself. When you first discover that you can trade binary options with such a tiny amount of money in your account (which may feel like a lot, if you do not have a lot in general), you may feel encouraged by the low entry barriers. But as time wears on, you may start to realize that the entry barriers are still there—they are simply invisible.
This chart shows you our choice of great minimum trade binary options brokers.
What do I mean by “invisible entry barriers?” I mean that even if you have the capital required to open a binary options account, you may not have the capital to fill your pockets in an efficient manner. If you deposit $200 into a trading account, yes, you can trade, but how much money can you actually make on each trade? That depends on how much you invest.
Money Management Percentages
If you invest 20% of $200, you are investing $40 per trade. If you are making 75% payouts, that is about $30 a trade. That is not a whole lot, but that means that every four trades or so, you add about $100 to your account in the beginning. The thing is, if you lose 5 trades in a row investing 20%, you blow your account. 20% is way too high, even though it may sound reasonable to you if you are a beginner.
At 10%, you are halving that amount. Now you are only making about $15 per trade. And 10% is still too high. Drop that number to 5%, which is probably the very outside of what you should possibly consider as a trading percentage, and you are now making about $7 per trade. Oh, and you have an additional problem—you probably are under the minimum investment threshold. In other words, your broker probably is forcing you to trade more money. Ten to twenty-five dollars is the typical minimum risk required to place a binary options trade (though some brokers, like MarketsWorld, allow you to trade as little as $1).
If you invest more money to begin with, you can get around the minimum investment threshold issue if you are trading with a broker that has a higher minimum. If the minimum is $10, you can get started with $200. If the minimum is $25, consider depositing $500 into your account. This allows you to trade a reasonable percentage of your account. But as you have probably realized, it does not eliminate the other issue, which is that you are still trading a minute amount of money. How are you ever supposed to profit with $25 trades?
Get Perspective on What Profit Really Is
Here is the reality about trading in any market. Profitability technically has to do with how you are trading, and what direction your account is moving in than how much money you are actually making. If you are making $25 a week trading binary options, you may feel like you are moving absolutely nowhere with your trading career, but the fact is, you are still more profitable than a trader making $2,500 one week, and losing $3,000 the next. If you are consistently winning, you are consistently moving in the right direction. Making it big at that point is more a matter of time and patience than anything. That does not mean you cannot still be or feel stuck. Maybe you are. But if you get impatient, you may fall into the dangerous behavior of overtrading. Do not start making these mistakes.
What is Overtrading?
Overtrading means taking too many trades and compromising on your setup standards. We will assume that you are already diligently sticking to your money management plan and refusing to trade too much on any given trade. The temptation is to make up for the small nature of your wins by winning more often. And that means trading more often.
This is where you are likely to find yourself looking at trade setups you would normally skip over, setups you would rate as a “B+” instead of an “A.” You may not notice the consequences right away, but over time, as you place more and more of these compromised trades, you will probably start losing more often and winning less often. You may also start to forget what an “A” trade looks like. At that point, you lose all perspective on what really makes a trader profitable. Your trading starts to fall apart, and then you wonder what happened.
If you absolutely must trade more often, the best thing you can do is look at more assets, not simply stick to your favorite asset and start compromising on setups. You should always take only the very best setups, and if that involves looking outside your usual assets, you may have to learn how to trade other assets.
Think in Future Terms
Another helpful adjustment you can make is to your mindset. Maybe you are making about $25 a week now—about $100 per month. But your account is growing, and it is important to remember that once your account does get larger, you will be investing a larger amount at the same percentage. When you have $5,000 in your account, you will be making $250 per week, not $25. A grand a month is pretty nice supplemental income. And once you have $50,000 in your account? At that point, you will be making $2,500 per week. That is $10,000 per month.
Be wary about focusing too much on numbers. You always want to focus on what you are doing right now. But it is always good to remember the enormous potential energy in what you are doing. That $25 a week you are making now in a sense is the $2,500 you are going to be making later. That is why we call it investment. You are investing not only in the market, but in yourself and in a working strategy. That same daily routine which you are doing now to make $100 a month could pay you $10,000 a month someday.
So what makes success? Capital or skills? Capital is definitely a key ingredient. There is no denying that you will profit more quickly, all other things being equal, if you have more money to trade with. If you are patient however and you have the skills and discipline, you can still get there eventually. And if you had all the capital in the world and no skills, you would simply lose all that money. In that sense, skills have more ultimate value than large amounts of trading capital. So be patient, invest in yourself and in a reliable trading strategy, and hang in there. Your smart choices now will pay off big later.