Risk and Money Management How to Reduce Your Risks in Binary Options

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Good Choice for Beginners!
    Free Trading Education, Free Demo Account!
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  • Binomo
    Binomo

    2nd in our ranking!

Four Ways To Limit, Reduce Or Control Risk In Binary Options

Think binary options aren’t risky? Think again. You must read this guide for reducing, controlling and limiting you risk.

Risk Is One Thing, Being Risky Is Another

Speculating financial markets, trading and trading binary options carries risk. It has to, that’s the name of the game; risking investment capital on the changing prices of stocks, forex, indices and commodities. In general, the more risk you take the bigger the rewards, the catch is that the bigger the risk well, the bigger the risk. What most successful traders know and aspiring traders want to understand is that risk and taking risk does not mean being risky. You can take risk in a calculated way, profit and move on. You can also be risky, blow your wad and get washed out of the market.

Scammers Are The First Hurdle– The first way to limit your risk is to avoid scams. I know this may sound like pretty basic stuff that everybody knows how to do but unfortunately it’s not. Binary options has grown up in many ways but so have the scammers. Every time I find a new good broker I find a new scam to match it; the trick for any trader is to learn to spot them. For newbies it can be a challenge. Shady brokers put a lot of effort into looking legit. Some go as far as cloning the name of a well known financial company to lure traders in, others create fake regulatory agencies to give them a stamp of approval. In the periphery are all the schemes, trading systems, autotraders and gurus who claim they can make you rich. I know its tempting but if it were really that easy then everybody would be rich. Here’s a tip, if it’s free there is a good chance it is a scam. If it, whatever it is, has real value it would cost money.

Get Your Head Out Of The Clouds – The second way to limit risk is to keep it real, get your head out of the clouds and come back down to earth. Trading binary options is fun, it’s simpler than other types of trading and you can make money doing it. It is also risky, challenging and not something everyone can master. If so, every one would be doing it, right? You have to be realistic, it’s nice to dream of wild profits and vacations on the beach but it takes more than a deposit and wish to succeed to get that kind of results. If you have already been trading then you know its hard, binary is easier but still hard. If you haven’t been trading know this; it will take time to become consistently good. Notice I say consistently. It is not hard to produce some wins but you have to be ready to make some losses along the way. The key is to pick more winners than losers so that over time you come out ahead. If you think you are going to walk right in and make a pile of money you are going to disappointed.

Focus On What You Are Doing– Staying focused is a third way to limit risk. There are a lot of indicators, more strategies and hundreds of assets to use them on. With all that it is easy to get distracted and I have not even mentioned the fundamentals, the economy, market sentiment or the never ending line of gurus, signal providers and tipsters trying to get your attention. Jumping around from tool to tool or strategy to strategy is a quick way to loose money. The purpose of a strategy is to weed out the false signals. If your strategy is not working it is probably not a problem with the strategy, it’s probably a problem with how you are using it, how you are trading or some other aspect of your system. Focus on what you are doing, learn it so you know how to use your strategy and system properly, don’t look for next holy grail. It stands to reason that if you can’t make one strategy work right you’ll have a problem with the next. My hedge, it is OK to experiment and learn new strategies, just do it wisely.

Don’t Wipe Yourself Out – The fourth way to limit risk is to use wise money management. I can’t say this strongly enough, wise money management. This is where the rubber meets the road so to speak. You’ve avoided scams, you understand trading is a challenge, you’re focused on a strategy and ready to make a trade. Even after all this risky behavior such as placing to much money on one trade can wipe you out faster than just about anything else. Account management and position sizing is intended to let you trade but never enough that one loss, or a even a string of losses, will wipe you out. The generally accepted rule is to use a % of your account. This way your trade amount will grow with your account, maximizing profits, while keeping each trade to an appropriate size. Low risk would be 1-2% of account value, high risk might be as much as 10% but the generally accepted range is 3-5% on each trade.

How to minimize the risks of losing money when trading binary options?

Despite all the advantages of trading binary options in this mode of working with financial assets, like any other direction of trading, there is an indicator that has a critical impact on the end result of any trader’s work – it’s about financial risks! It’s the risks that do not allow you to achieve the goals set by the market participant and lead to a loss of investment capital. Most beginners and experienced traders faced such a problem. Today we offer for beginners of binary trading a list of recommendations – how to minimize the risks in trading binary options. We do not offer supernatural approaches or methods to reduce losses, but only recommend certain rules of conduct on the market that allow us to obtain the optimum risk regime.
So, let’s start from the very beginning and talk about the risks from the position of knowledge and experience. Most potentially successful investors lose their money in the first week of trading only because of excessive self-confidence. A familiar situation – I can, like that guy, earn fabulous money! I learned the instruction on drawing up options – what else do you need !? Yes, I can earn as much as I want! Well, other conclusions of this kind! Yes, with this start-up, the risks are simply incredibly high and the loss of the deposit is only a matter of time. Hence the first recommendation for minimizing risks – before completing your first real contract, thoroughly study all the techniques and approaches to option trading, as well as the very algorithm of the contract itself!

We go further, we will consider the statistics of trading operations. Many know that the growth of capital and the volume of profitability of trading depends on the number of issued rates with a positive outcome of the expiration. There is such a thing as a negative mathematical expectation, so in binary trading it is -15% with a maximum payout rate of 85%. It is these 15% of the difference between loss-making and profitability of contracts that eat up your deposit. Therefore, the main recommendation of professionals in effective trading is the use of highly efficient trading systems or forecasting (as you like more). In order for the investor’s capital to increase steadily, it is enough to execute more than 60% of contracts with profitable expiration. All is simple, so you will block losses from unprofitable rates and create conditions for the growth of investment funds. For example, a simple and uncomplicated system based on standard analysis indicators gives more than 80% of profitable contracts, which allows you to increase capital with high dynamics and always be in the positive area of ​​the account balance:

This will be the second recommendation on risk reduction techniques – always use the market valuation strategy – this will give you the opportunity to work in the market without critical losses of capital.
And finally, the financial indicators of trade. Here we are talking about the rules of money management and, directly, financial risks. Heard “Risk management” or “Money management”? Yes of course heard, but only if you have already merged your deposit, you just did not use these rules. Here everything is extremely simple and long calculated! To minimize risks, professional traders recommend choosing in each individual case a certain indicator of the value of options, which will have an optimal correlation with the efficiency of the strategy with the volume of trading capital. Standard values ​​of money management are considered to be the value of options, which is no more than 3-5% of the amount of capital. This mode of trading gives a completely normal level of risk, which allows you to earn earnings consistently, and not lose money. It is for this reason that most professional brokerage platforms set financial requirements for starting capital and the cost of options at a low level. For example – the best brokers, who are considered to be market leaders and technically advanced trading platforms, set a minimum deposit amount of 10 USD, and the value of contracts at the level of 1 USD. Thus, even on a minimally available trading account, it is relatively safe to trade options.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Good Choice for Beginners!
    Free Trading Education, Free Demo Account!
    Get a Sign-Up Bonus Now!

  • Binomo
    Binomo

    2nd in our ranking!

Let’s sum up. To minimize risks in binary trading, you need only a few logical things:

• Professional knowledge and experience in trading
• A working strategy with a good performance indicator
• Discipline in terms of financial management in the process of trading

If you follow these recommendations, your deposit will be safe!

“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”

Minimize Risks in Binary Options

Binary options trading is a risky investment, so you want to make sure that you take steps to minimize these risks. If trade carelessly, without taking any precaution steps, you will find yourself losing a lot of money. The following are seven tips on how you can reduce the risks in binary options trading.

1. Money Management

You have to get disciplined in money management, because you will be the one deciding how much money you want to invest into the binary trading. Getting disciplined in money managements means you are to set a limit for how many wins and losses are to be allowed in one day. You must, by no means, control yourself and stop trading when the limit you have proposed is reached. You can make a proposal to yourself to stop trading based on the number of wins/losses, percentage of losses, amount of wins/losses and winning ratio. For example, you can propose to yourself to stop trading when you win 10 times/lose 5 times.

2. Trade on a Small Amount

As a rule of thumb, you should always trade in small amounts, no matter how high the ROI rate is. It can be tempting to invest all the money in your trading account when the broker offers a high ROI of 95%, but it is better not to do so. This is because you won’t make the right prediction every time in reality. For example, if you $300 in your account, you should start by just trading $30 in each trade. Trading in small amounts can help you to accumulate into a large amount of profits over time while minimizing your losses at the same time.

3. Choose a Broker with High Out-of-Money Rate

You should choose a broker that offers some refund for trades that end out-of-money. For example, the broker may offer a refund 10% for out of money trades. This means that you will get back 10% of the capital you invested, if you lose the trade. To find out how much return rate the broker offers, you can check the FAQ section or ask the representative.

4. Monitor the News in the Market

It is essential that you perform a research by using technical analysis tools and monitoring the news in the market, if you want to increase the chances of making a correct prediction. The source of the financial news you rely on, must be up to date. You should get educated on binary options trading by reading books and watching tutorial videos.

5. Implements Hedging Strategy

The hedging strategy requires you to place a trade in both, the call and put positions, to reduce the risks in a volatile market. You will have to predict the highest or lowest level within a certain trading period. The best trading period would be when the movement of the price is within the symmetric channel. You should place a put when the price touch the previous high resistant level and place a call when it touches the previous low support.

6. Choose a Broker with Sell Back Feature

There are a number of brokers that offer the sell back feature on the platform. The sell back feature allows you to end your trade prior to the expiry if you know that you have predicted the wrong direction and will lose. Using the sell back option can help you to get back a portion of your capital that range from 40% – 60%. Although you didn’t get back the full amount of your capital, you still manage to get back almost half of your capital. This is better than you end up with nothing in the event that your trade end out-of-money.

7. Diversify Your Portfolio

You can also reduce your risks by diversifying your trades across different types of asset classes. For example, you can trade on stocks while trading on forex currency pair on a single brokerage account. Apart from diversifying the asset classes, you should also diversify your trading strategies. You can implement both short term and long term trading strategies to reduce your risk.

The key to success in binary trading is to maintain a balance in between the profits and risks. You should always set a budget before executing a binary options trading activity.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker 2020!
    Good Choice for Beginners!
    Free Trading Education, Free Demo Account!
    Get a Sign-Up Bonus Now!

  • Binomo
    Binomo

    2nd in our ranking!

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