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

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Binary Options Risk: How to Minimize It

“How to manage your binary options risk – Learn how to reduce risks while trading binary options”

Behind every great trading strategy for binary option there is a good risk management plan. In reality, how you manage your binary options risk is one of the most important aspects of trading, nowadays. In fact, it is a common mistake for traders to overlook the risk that they are taking in their pursuit of return. However, such neglect will almost inevitably lead to substantial loss further down the road.

Here are some factors which you should consider when putting together your financial plan.

Diversify Your Trading

In order to increase the profit ratios, you should always look for ways in which you can maximize your profits, and it is equally important to minimize your binary options risk trading. A simple way to that is to diversify trading across different assets. It is a very easy work with binary options as you can trade on a range of different asset indexes from a single broker account.

Split Your Strategies

In addition, in order to diversify your trading across markets, you will reduce your binary options risk by diversifying your trading strategies. The contracts/bonds used in binary options lend themselves to trade in several different approaches and you should make use of this opportunity to lower your risks in binary options trading. One simple approach you could use is to make use of both a short-term and longer-term trading strategy to determine the right asset and strategy for you.

Structure Trading

Any trading that you perform should be well-structured and should rely upon good reasoned analysis and research. You should properly prepare for each position that you can take on your trading account and go through potential binary options risk to limit these as much as possible before you even place your trade. Keep an eye on events that could tip the probability of success against you when trading. Additionally, try making a rule to avoid having open positions when the risks in binary options look high. Because, there is no harm in sitting out of the market once in a while.

Confidence Not Arrogance

There is a fine line between showing self-confidence in your trading decisions and arrogance. Although overconfidence is not a desirable trait in financial matters and is unlikely to get you very far when it comes to trading with binary options. On the other hand you can also suffer from a lack of confidence while trading . The tentative trader may well put themselves at bigger risk as they lack the conviction needed to take the strong decisions. You need to carry out your analysis thoroughly and you will gain the self-confidence to overcome market risks.

Superior money management

This is the technique that separates the newbie traders from the excellent traders. It simply involves covering the spread while trading with currencies in binary options. The trader should try to be profitable each time by ensuring that some money is earned despite the shift in exchange rates. In truth, that is what makes binary options trading different from other traditional form of trading. In this strategy the profits to be made are previously known prior the execution of the trade and whether the prices go up/down, the overall gain should always be the same.

The right trade type

It is the most important fact in reducing the chances of incurring binary options risk, and it involves adopting the right type of trade at all cases. In binary options, certain types of trade are well suited with specific assets. For example, an asset with an alleviated rate of volatility will be more appropriate with range or boundary contracts. In this case, all that the traders needs to do, is to develop some little experience as well as some observation skills, and then they will be able to link every asset with a precise type of trade.

Self-control

It is a very important aspect that every trader should have. In fact, self-control will help traders to manage risks in binary options if they learn to set a target for a day earning, and stop instantly they hit their target without being compelled to trade further. In most circumstances, traders incur losses because they are usually pushed by greed to make more money and that is why traders should exercise a certain degree of self-control to avoid incurring heavy losses.

Education

Binary trading and guesswork are parallel and will never flow together. It is the reason why every Forex/binary trader is encouraged to get the right education when it comes to this form of financial investment. All traders must be well informed on how Forex or binary options trade is carried out, as well as how they can conduct the trade successfully without incurring losses. Education helps traders to make decisions together with avoiding guesswork and being safe from incurring heavy losses.

However, if you want a kick start of your trading life, you need to educate yourself about trading. You need to avoid losses and begin to risk free trading with binary options signals or trading tools. 10trade is a great broker where you will get all of the features to reduce your risks binary options. Not only they will provide you the necessary trading tools and signals, but also they will teach you in their education center. They always dedicated to educate the above mentioned criteria to their clients, so that they can be aware of the risk minimization techniques very well.

Best Binary Options Brokers 2020:
  • BINARIUM
    BINARIUM

    Top Broker!
    Best Choice For Beginners!
    Free Trading Education!
    Free Demo Account!
    Big Sign-up Bonus!

  • BINOMO
    BINOMO

    Perfect For Experienced Traders!

For more details: Go 10trade – 3 Risk Free Trade

Binary Options Risks

Binary Options Risks and How to Manage Them

Successful trading is all about understanding and managing probability. There isn’t a magic bullet that will guarantee that all of your trades are successful, so in the absence of that, every smart trader needs to think about binary options risks and developing strategies to manage them. You can’t manage binary options risks if you don’t have both an effective trading strategy and money management strategy.

You can base a trading strategy on:

  • indicators (trend indicators, oscillators or both)
  • a theory of trading (Elliott Waves, Gartley, Gann, Point and Figure, Drummond, etc.)
  • anything else that might reasonably be expected to generate a profit.

With binary options you don’t just have to say which way the price is going to go, you also have to say by what time or date it will do so. While they don’t seem as complicated as some of the more exotic financial instruments, don’t be deceived into thinking that binary options are simple. You still need to manage your binary options risks when you trade.

What Makes a Good Money Management Plan?

Managing risk means managing the variables within your control. These are:

  • how much money you put into each trade
  • the asset you choose
  • the way you think it will move
  • the expiration date

Steer Clear of Short-Term Expiration Dates

It may seem odd, but the direction of price movement is not your greatest concern, the expiration date is. Minute or hourly expiration dates are best avoided because they’re one of your biggest binary options risks. It’s much better to use end of day, week, or month. Let’s face it, you might be looking at greater than 70% return on your investment, so there’s no need to rush into anything! You can afford to take a longer view, no matter how hard a broker tries to appeal to your greedy self with tantalising short-term offers. It’s in a broker’s best interests to influence you with fear and greed. So, to survive as a trader over the long-term and manage your binary options risks, it’s best to only listen to the voice of reason.

Brokers won’t make it easy for you though. You might have been hoping to set your own expiration dates, but they try to limit their own binary options risks by setting them for you. They would much prefer it if you’re expiration time fell just when the market was at its most volatile, like when significant economic news is scheduled to drop.

To manage your binary options risks, set your expiration is well beyond such events and avoid the shorter expiration dates whenever you can.

Trade Only a Few Assets

You need to check the economic calendar for the coming week every week. Look out for important news that affects your underlying asset and consider what it may do to its price. And to start with, consider only trading with one or two assets that you understand. The more assets you dabble with, the more you open yourself up to being blindsided by something that you didn’t expect. Binary options risks are better managed if you stay within your areas of understanding.

For instance, if you know that an event is coming up that may affect the US dollar, such as a non-farm payrolls announcement on the first Friday of the month, it might be prudent to stay away from trading USD pairs until afterwards. It’s been established that the dollar will range before that Friday, so you’d be hard pushed to guess which way the market will go. Better to avoid the dollar during that period and keep your binary options risks to a minimum. If you are hellbent on trading, however, you could look to set your expiration date for some time afterwards, when volatility has died down.

Direction and The Amount to Trade With

The amount you choose to trade is also very important. After you’ve completed your technical and fundamental analyses, you should apply the same diligence to selecting the size of your trades.

If you have $2000 in your trading account, you could split it into 10 equal parts, and trade each lot of $200 in the week ahead, so 10 lots of $200.

You could also divide that $200 between one index, a commodity, and two currency pairs, so you would wind up risking $50 on each one. Do so and you’re now looking at 40 trades over a 10-week period, and what are your chances of losing on every one of them during those 10 weeks?

Given that you will have spent time researching your underlying assets and their price movements within the market, it seems unlikely that such a dismal outcome would befall you. Even if you flipped a coin to decide what to do on every trade, probability would suggest that half of them ought to be successful. So, it should be clear that by combining your research with a high number of well thought out trades, you will not only be reducing your binary options risks but significantly increasing your chances of trading success.

Risk Management in Binary Options

When you invest your bitcoins, there is always some sort of risk involved. Binary options, just like any other form of financial trading, is no different. You could lose most of your invested capital, if you are too careless or greedy. The proper model of risk management (sometimes called bank management) is something you are expected to consider as soon as you start your binary options trading experience. We will base our analysis on BitPlutos platform, the very first binary options platform running exclusively on bitcoins.

The widely accepted bank management rule adopted universally by professional binary options traders is that no more than 5% of the account size should be invested in the assets at any given point in time. So, if 2 BTC is your current balance, you should not invest more than 0.1 BTC at any given time. Trading anything more than this is already thought of as “risky”. Losing 50% of your trading capital is different to losing only 5%, isn’t it? This is very important, keep that in mind and you should never go bankrupt when trading binary options with BitPlutos, otherwise you will fall prey to what we all want to avoid when trading – gambling.

Trading at BitPlutos is pretty much like forex where you can minimize your losses early if you see that you are likely to go “out-of-the-money”. In general, BitPlutos is the broker that gives back up to 15% of invested capital in trades that are out of the money (dependent on asset), but if you intend on complying with the risk management rules, you will also need to use other tools which will be discussed below.

Roll-Over

Imagine you’ve opened a new trade, and it’s going to expire in 30 minutes. You’ve been in-the-money so far. Suddenly, notice that the asset you’ve invested in is now starting to change its direction and you are now out-of-the-money and you see no reason that the trend is going to stop. This is where Roll-over comes into play. What does it mean and how does it work? It means that you can extend your expiry time. You’ll be asked to add a certain percentage to your investment, usually 30% of your initial investment amount. But there is also the advantage of it – If your option expires “in-the-money” at the end of that period, you win more money (your initial investment + 30% extra are now your basic investment, remember?).

Check out the screen below to see where the Roll-over tool is located (search for “Open Positions” below the trading platform)

After clicking “Roll-over”, you just have to select a new expiry time. Below it, you can see you the new investment amount (30% extra)

A few points to remember:

  • the Roll-over feature is available only for Binary that are out-of-the-money
  • there is a time period when you can use the Roll-over, usually it is terminated 10 minutes before the expiry
  • you can use the feature only once per trade
  • when properly used, it may minimize your losses and let you bounce back when market volatility occurs

Double Up

Doubling up is a similar concept to the Roll-over. You’ve probably guess it right – you double your investment. So one can either make bitcoins very fast or lose them very fast – it all depends on whether the trade goes in one’s favor or not. There are two situations that are suitable for Doubling Up :

  • the trend is steady and in your favor: keep up with it and open another pro-trend position. Mind you: avoid charts that show rapid market movements. Only steady trends (lasting for at least 1 hour) are to be used here!
  • a trend correction is about to happen: you opened a trade but you were not right about it, you are out-of-the-money. But from the chart your can clearly see that the correction is almost here. Double it up – it should compensate for your first loss as the system opens another option with the same direction but a different strike price (the current one).

Check out the screen below to see where the Double Up tool is located (search for “Open Positions” below the trading platform)

Check the current asset rate (strike price) and decide if you want to double it up with the same amount (1 BTC).

A few points to remember:

  • the Double Up feature is available for most of the option types
  • you can use the feature only multiple times per trade
  • when properly used, it may maximize your profits and compensate for losses

The opportunity to sell one’s position is highly underestimated by traders. People’s greed usually takes over the safe yet less profitable trades. This is a wrong approach though. In fact, selling your position at the right time can guarantee you constant profits. They are substantially lower than the regular binary options profits but they are pretty much assured.

First off all, you can use the Sell tool to get rid of the option that is out-of-the-money. Obviously, the price offered to you will be substantially lower that your initial investment, but at least you will not lose the whole amount. And the price is 100% dependent of the current market situation: the more you lose, the worse price you get. And vice-versa.

But what if your option is in-the-money? Well, this is when the real fun begins. Yes, you can sell it too! And get your profits, relatively small, but without waiting for the expiry. The price you get is also reliant on the market situation and will never be as high as if you waited patiently for your option to expire, but your profits are way more secure this way. Just wait for you option to be in-the-money and check for how much you can sell it.

Check out the screen below to see where the Sell tool is located (search for “Open Positions” below the trading platform)

Check the current price that you can sell the option for and decide within 3 seconds what you want to do (the price is always on the move due to the market conditions, you can reload though). As you can see, you already get 15% from your option.

A few points to remember:

  • the Sell feature is available only for some of binary options types
  • there is a time period when you can use the Sell feature usually it is terminated 10 minutes before the expiry
  • when properly used, it may minimize your losses and let you gain small but consistent profits. Perfect for patient investors

Important: availability of the above discussed tools may vary depending on the type of binary options you choose to trade.

But how shall one figure out whether to double up, use the rollover tool, sell it or go on with the investment already made?

It’s a question of bank management. For some traders, it’s simplest to avoid rollover or doubling up and continue with being very consistent about their investment amounts. Other traders love these features – they’re good at taking advantage of good opportunities when they arise (double up) or using Roll-over as the last resort. It is all a matter of practice. We recommend practicing on historical data and consulting your Account Manager before establishing your trading strategy. Different methods call for different techniques, and different personalities are suited by different money management styles. The only way to find out what’s best for you is to test for yourself.

We all hope to win but the truth is that there will be times when we make bad trade calls. No one is perfect, don’t expect to be either. It has happened to everyone; even the greatest investors suck at times. But what separates those who re-emerge as successful traders from the rest is the ability to control their risk. Please control yours too.

And we have a very special gift or all the readers: sign up now and get NO RISK trades with BitPlutos! What does it mean? It means that the broker will return your lost trades back to your trading account! The amount of no risk trades is negotiable and depends on your initial deposit. For those who feel more comfortable, the broker offers up to 100% Welcome Bonus. Just open your account with one click below!

Best Binary Options Brokers 2020:
  • BINARIUM
    BINARIUM

    Top Broker!
    Best Choice For Beginners!
    Free Trading Education!
    Free Demo Account!
    Big Sign-up Bonus!

  • BINOMO
    BINOMO

    Perfect For Experienced Traders!

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