Trading binary options is simple. And if it’s simple, you should have the energy to focus on managing your money correctly.
If you manage your money correctly while trading binary options, you should increase in value many times over.
Just like in any kind of trading, good money management starts with finding a decent broker with a good track record for paying out.
All your time is wasted if you get stuck with a scammer.
What Is the Next Thing You Should Do To Manage Money While Trading Binary Options?
Look for payouts as close to 80% as possible.
The higher the better, of course. But payouts have gone down across the board over the years. So expect something between 70-80%
Obviously, brokers are in it to make money too. They aren’t machines that crunch numbers and dispense money.
The best trade for them is a 50/50 trade in either direction. So make sure you get a broker who is willing to go in 75% or more on a trade deal.
What Are The Best Strategies To Managing Your Money?
If you’re looking for a simple system, try the “Kelly” system.
It’s become a preferred money management system over the years among those trading binary options.
The goal of this method is to maximize chances of profiting from the trade while at the same time minimizing the risk.
How do you do that? First access your last 60 or so trades. Calculate the winning probability by dividing the number of positive returned trades by the total number of trades.
Any number above 0.5 is a good number here.
Calculate the win/loss ratio by dividing the average gain of the positive trades by the average loss of the negative trades. This number should be greater than 1 if you average gains are greater than average losses.
Now, take those numbers and plug them into Kelly’s equation.
The number you get is the Kelly percentage.
How Do I Use The Results Of The Kelly Equation?
The results of the Kelley equations should tell you how much you should diversify.
If the Kelly percentage is, say, 0.05 or 5%, then place 5% of each of the equities in your portfolio.
Keep this rule in mind, however. Don’t ever commit more than 20-25% of your full capital to one equity.
You will be risking more than what it’s worth if you put more than that into one equity. Remember, the Kelly system is designed to mitigate risk and balance it against potential profit.
Another thing to remember: this was designed to help you diversify while trading binary options. It’s not designed to help you pick the winning options. There is always a certain amount of “luck” or randomness or unpredictability in markets.
Learn to use systems like this to know how to diversify. But continue to trade consistently. Randomness and volatility are the cause of many temporary market swings in account value.
The bottom line is that money management will not always guarantee spectacular returns. But it can help you limit loss and maximize gains.
If you like what you read, share it with your friends. And, as always, keep on trading.