How To Manage Your Binary Options Investments
It is imperative that you understand that trading options come with risk. Especially binary options are followed by plenty of losses for those who do not have the fundamental understanding of how they work. A common advice for people, who are interested in trading in general, and binary options especially, is that you should never invest more funds than you are prepared to lose. In essence, you will win some and lose some. This makes for the most important point of all: you need a solid money management system in place before you even consider binary options trading.
A proper strategy will help you to manage your trades and take away the pressure that often comes with trading, out of the equation. With a solid money management system, you will be more rational in your thinking when your trades prove to be a loss and it helps you not to succumb to greed when you have a winning streak. To start off, think of or write down your disposable investment income. This will be the sum you are prepared to risk and trade with. Calculate about 5% - 10% of that disposable investment income and this will result in your monthly trading capital. Never trade more than these 5% - 10% every month. As you gradually become more experienced with trading binary options, you can move the bar up to trading 20% - 30% of your disposable investment income per month.
Let’s play it all out in an example to easier understand the process. Imagine that you set aside $1,000 this month to use for trading binary options. We start off with the lowest level of 5% per month. This will give you a $50 to trade with for that month. Assume that you put in two trades for $25 each. If your trade turns out to not be what you predicted, and your option finish out of the money you will take a loss and end up with $950 in disposable investment income. However, if your trade turns out favorably, you will have $1050 in your brokerage account.
You will be able to make more trades and with much less risk if you divide your disposable investment income into small sections, such as starting with 5%. In addition, trading with smaller portions of your disposable investment will increase our trading stamina, meaning that you will be able to trade for an extended period. Trading your investment capital with a proven money management method and minding your risks will set you up for success. You will be able to adjust your strategy at a consistent pace month by month. If you want to maximize your trading profits, this is a solid money management method to follow.