Money Management with Binary Options
When it comes to investing, especially when you are first starting out, experts will always tell you never to invest more money than you can afford to lose. This may seem like overstating the obvious, but it should also make you aware of an important point; there are as many losers when it comes to trading binary options as there are winners. This only highlights further the need for a well thought out money management strategy before you start trading binary options.
An effective money management strategy will help take the extra pressure off as you trade because you are using surplus income that will not bother you as much to lose if your binary option trading does not prove to be successful. A general rule when you are first starting out is to start making your initial monthly trades by using no more than 5% – 10% of your disposable investment income for the month and then gradually increase this to 20% – 30% a month as your binary option trading skills increase and you become more successful.
Here is how that works. Say you have decided that you have a total disposable investment income of $1000 for the current month to trade with. The 10% starting figure we mentioned means that your first trade should be no more than $100. You then make a binary options trade for $100 or you can do two binary option trades for $50 etc… If your option finishes out of the money your total disposable investment income for the month will be reduced to $900 and if your trade finishes in the money you will then have increased this total to $1100.
By only investing a small amount of your total disposable investment income to start, it allows you make more trades during the month and trading over this longer period of time and should give you a better chance of coming out ahead. It also will allow you to chart your results as the month goes along and adjust the total percentage amounts according to how your month is working out trade wise. This is a proven binary option trading strategy that will help you consistently maximize your monthly investment pot.
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References and Further Reading:
1. Unwinding RON carry-trade or RON speculative attack? (SE Dincă – 2013)
2. Applications of Classical Mathematical Methods in Finance (A Lipton – 2012)
3. Global and Country-Specific Variance Risk Premiums and Forex Returns Predictability (A Aloosh – 2012)
4. Bridging to the Trillions Market (M Abang – 2014)
5. The USDJPY carry trade channel and its impact on the US equity market (A Constantinescu, D Moldovan, M Moca – 2013)
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