Is it Possible to Become a Millionaire While Trading Binary Options? Part 2
Trading binary options is not a random investment opportunity; every trade must be placed according to your own formula. Most successful traders make a profit because they understand the mathematical issues which exist within the options market. This formula refers to the power of compounding; where profits are multiplied by investing the original funds and any profits. This process is completed over and over again with many short term trades. The result can be a rapid building of funds. The best traders will use just their profits to trade, keeping the original investment made at the start of the day to build their reserve funds.
To understand this concept it is best to follow this example; if you have been trading for a while and you have an account balance of $3,000 you may have a strict policy of investing just 5% of this amount every day. This would be sensible as you will not risk all your funds. This means that you will have an initial investment fund of $150 to start the day. If you place this on a trade with an 80% return, and you win the trade you will have $270. This is the amount you will place on the next trade, again, if your prediction is correct you will gain 80% and your capital will rise to $386. In this way your capital can rapidly increase. If you then stopped your account balance would be $3,386; five percent of this would mean you start the next day with a $170 for your first trade. It would grow even more rapidly with positive trades.
The most important rule is to know when to walk away; if your limit per day id 5% and you lose it on the first trade then you must accept this and wait until the next day to start again. The example shows how quickly your funds can build up, each day could start with a higher initial stake but at no increased risk to yourself or your funds. This concept applies regardless of whether you start with $100 or $1000.
Of course your initial funds can also reduce if your binary options trades go the wrong way. This is why it is essential to adopt a strategy when trading binary options. This will help you to make the right decisions and maximize your profit. If you understand that it is possible to compound your returns and rapidly grow your capital, but, that the risk is losing all your gains so far that day, then you will be in the right place to accept any trade.
In effect the chances of predicting a trade correctly are fifty/fifty, although your research, tools and experience should help you to choose the right side; there will be times when you do not. The logical conclusion of these sums is that it is possible to become a millionaire, but it could be a long process with many ups and downs! Restrictions on the amount you can trade each time will also slow your progress.