Binary Options Risk Management

Importance of Risk Management in Binary Options Trading

It is absolutely impossible to win in every trade. By a lot of practice and technical analysis, it is only possible to increase the success rate in Binary options trading. So where lies the secret of success in binary options? The true success lies in money management and trading strategy with disciplined trading.

Binary options risk management can be done by not risking more than 5% in any trade. A well-proven money management strategy should be in place to recover losses.

Don’ts :

• Don’t trade 15 or 20 trades a day. Trade only a few good opportunities, 3 – 5 winning trades per day.
• Don’t trade if you lose 3- 4 trades. Don’t try to recover by increasing trade size. By doing so you may blow off your account in just a few minutes.
• Don’t do revenge trading after a loss to recover. Rather trade responsibly to recover as per your strategy.

NOTE: This article/material is not investment advice.

RISK WARNING: YOUR CAPITAL MIGHT BE AT RISK.

Secrets of Success in Binary Options Trading

Many people constantly fail in binary options trading. They look for Binary Options Robots, auto trading software to get rich quickly, and further lose money. If there were some real profit-making trading software or robots, why the owner of the software would like to sell it. Nobody in this world wants to make some stranger rich for Free or by charging a few bucks. Instead, they would create as many accounts with different brokers and make millions from these accounts.

Now, Let’s see what can actually bring you success in binary options trading.

• Trade a small amount (1 or 2 %) in each trade, make 5 to 10 trades daily to make 5 to 10 % profit daily. Although trading binary options trading is available 24×7, it is not wise to trade 24×7. Trade only when there is good volatility in the market and technical analysis gives a good prediction. The best time to trade is usually when London and New York markets open simultaneously (1200- 1600 hrs GMT), and Sydney and Tokyo (2300- 0600 GMT).
• Constantly follow your money management strategy. Write down your strategy and investment rules and follow them strictly.

Example: I follow  Stochastic, RSI, and Bollinger bands to find my trading points.

– When Stochastic is greater than 80, RSI greater than 70, and Candle ends outside the upper Bollinger band, I go for a PUT with 5-minute expiry.

– When Stochastic is less than 20, RSI less than 30 and Candle ends outside the lower Bollinger band, I go for a CALL with 5 minutes expiry. This works best in a range-bound market.

– Avoid this method when the market is in a strong uptrend or downtrend. 

• After a loss-making trade, I wait for the next opportunity and invest the amount to recover. This gives my account steady growth. But I stop trading after 4 consecutive losses and start afresh. For a $1000 account, I start trading with $5, and after a losing trade, I trade with $10 and subsequently $25 and finally $ 50. If I don’t recover here, I stop trading for some time for sure.
  By following this strategy, I have grown my account significantly from $1000 to $70000 in 6 months.
• Don’t make revenge trading after a loss and subsequently blow out your account.
  After losing 4th time, as described in the above example, it is never advisable to increase trade size to recover. By doing so you are going to blow out your account. (Never do revenge trading)
  If you follow the above steps strictly, it really difficult to blow out any account in Binary options trading.
• Most traders usually become greedy and trade with big amounts to get rich quickly, blow out their account,s and make themselves poorer instead.
• Hence its actually poor money management to be blamed for every unsuccessful trader. Because if you follow good technical analysis, it is very rare to lose 4 consecutive trades. You can refer MT4 settings and trading guide for binary options with my recommended settings.

If you trade the way described above or by any other strategy and make 5 winning trades every day investing just 1 % of your principal ($10 in a $1000 investment).

Daily investment: $10 * 5 = $ 50

Daily return/profit: $ 35, considering a 70% return.

Monthly Return : $35 * 20 = $ 700, Considering 20 trading days in a month.

Here I have ignored the loss-making trades, because you have to learn to manage the loss-making trades by proper money management strategy. 

Your principal amount of $1000 can grow really fast to $24000 in 6 months  and $582000 in 12 Months by systematically compounding the investment.

This table shows compound interest calculated for 12 months assuming a 70% return every month.

( This is a hypothetical calculation based on speculation, it may not be practically achievable. )

Hence you can see $1000 can grow to $ 582K, if you consistently trade with control of your emotions, strictly observing your money management strategy.  Binary options trading is not like a 100-meter race rather it is like a marathon, which you have to complete by setting up your small goal every day. ( just 5 wins every day).

If you lose control over your trading and your emotions override your strategy, then you can never be successful in this Binary Trading Business.

Final words: To be a successful binary options trader, you have to look for 4 or 5 best opportunities to trade successfully by watching the market for 3 – 4 hours. You must continue this for just 1 year with a proper money management strategy, controlling your emotions and greed. By the end of the 12th month, you will definitely be rich.