Binary option trading is far from the complexities of other types of trading. It’s easy and simple to understand and above all, it’s very promising. It requires a discipline and a a clear goal from the very beginning in order to succeed.
Binary options trading is not a rocket science, however, a proper money management can result in high profits. Volatile nature of the market can result in a substantial amount of profit. At the same time one can incur unexpected loss as big as their lifetime profits. Thus binary option trading strategy calls for a proper money management with a clear goal in mind. I.e. How much profit do I want and what are my exit strategy for unsuccessful trades. Without an objective and a proper management, trader can lose on the way where they see high profits (greediness).
What is money management, and how does it apply to binary option trading?
The term money management in trading revolves around how much risk should an investor undertake. It means to take control of incomings and outgoings as well.
A good practice is usually to invest only 6-9% of the overall account balance at a time in one trade. If your account balance is more than €1,000 then even less than 6% per trade. In this case you’ll be able to save yourself from unexpected surprises. Bear in mind that this is for the ‘investor’ type of traders who are not making many deals per day.
As a tool against losses the principle signals to invest only part of the overall investment in one trade. For example, an investor wants to start trading binary options with an initial investment of €1000. A good money management recommends to invest only 6-9% of the initial amount at a time. That would mean not to invest more than €60 – €90 in one trade. This way losing a trade couldn’t harm a trader considerably. This is one of the biggest mistakes that new traders make. Even if you are quite sure that your investment will be successful, there are many factors that can make it the other way and you don’t want to lose, right?
Diversifying your trading portfolio
You’ve probably heard about it many times but I wouldn’t mention it if it hadn’t been so important. A renowned statement in trading says ‘Never put all your eggs in one basket’. A golden rule, right? Losing a trade is a common situation when you do it daily but risking all of your money steals an opportunity to keep trading. Diversify your assets (stock, indices, commodities, currencies) and expiration times and it’s also useful to diversify your accounts by using various trading platforms i.e. use 2 – 3 brokers at the same time. If you don’t know which broker to choose then head over to the top binary option brokers section and find the most suitable for you.
Using trading strategies for a consistency
When investing real money it’s practical to keep an eye on a trend. For example, if Google stock prices are going up, it might be possible that Microsoft prices are going up too. Similarly if these stocks are going up there is a possibility that S&P 500 would also show an upward movement. These ways trader find opportunities in the market and benefit from it. In the trading world it’s also known as Knock-on effect strategy.
Look for information that is coming towards the market, financial announcement on the macroeconomic level as well as on company level to predict a price direction of assets. Monetary announcements affect exchange rates; other economic indicators and profits announced by companies can take their stock prices high. Thus, keeping an eye on the economic calendar can help traders interpret present direction of assets as well as anticipate future possibilities in the trading market.
Conclusion – be confident and keep emotions aside
Don’t forget what are you trading and to be confident about the move you take. Don’t take a move until you are confident about it. But above all is to be ready to accept losses during the trading process. No trade can be carried out without incurring loss, thus you should expect a possibility of loss coming your way and learn a lesson from every mistake that was made. Take your loss as a lesson from which you can learn and turn it into a profit.