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Everyone can earn fabulous sums on the binary options exchange. However, do not forget about the risks as quickly losing everything..
The binary options trader has both powerful ups and no less sad drops.
The price of assets can change rapidly, increasing or decreasing the income of the trader. In the real world, it is customary to insure any risks. As a result, a broken leg, a car broken in an accident or a burned-out store will cease to be a cause for disappointment. As a result, you will get insurance and forget about such a nuisance..
Risk Hedging: Simple Money Management Rules
When working with finances, you can also insure yourself. Traders call this risk hedging. The rules for saving your own money when trading binary options are so elementary that you can not even doubt the success.
Money management acts as a kind of trading strategy. However, the rules for minimizing risks and how to avoid losses are relevant for absolutely all traders. Universal money management tips are applicable not only in binary options trading, they can also be used to manage your own finances.
Step-by-step risk management in binary options trading
Preliminary assessment of the situation
It’s worth trading only after analyzing the market, existing risks and in the presence of clear signals for opening an option. One of the main rules of the trader is the conclusion of transactions only for those assets that you can predict and independently evaluate. After all, you will incur losses as soon as the market changes direction.
Everyone knows that eggs should be laid in different baskets, and financiers in the first place. In binary options, you can immediately predict your losses. Unlike Forex, calculating losses will be much simpler..
The main principle of risk diversification is the opening of several transactions at once instead of one. For a deposit of $ 30, it is better (conditionally) to open 10 transactions for $ 1 and make a profit on each than to invest all funds in one, which will be unprofitable.
The optimal number of trade transactions
As practice shows, significantly limiting the risks and, consequently, losses is achieved by opening more options. For beginners, such a trip allows you to quickly gain experience. And professionals have long understood that with an increase in the number of options open, profit is naturally growing.
In this case, the greater the number of transactions closed in the “plus”, eliminates unprofitable transactions and helps to earn in the future. However, the simultaneous opening of more than 10 transactions will attract attention. It is better to try not to exceed this small limit, but at the same time choose short options with a short expiration period.
Statistics show that if only 60% of transactions are successful, the binary options trader gets his regular profit. Active trading helps to significantly reduce the risk of losing a deposit from unsuccessful transactions. It’s better to open deals on different assets. This approach maximizes market volatility..
Proper money management
You should never risk more than 50% of the available funds. This allows you to compensate for losses by saving half of the available deposit. After making the first profit, experienced traders limit losses in the same way. Trading continues at an amount of 50% of the profits.
The effectiveness of such money management is evident. You always control your own risks and at the same time insure yourself against unsuccessful options. At the same time, trading with only 50% of the available funds allows not only to engage in active trading, but also to naturally increase profits. Retaining 50% of the profit, you can gradually earn on binary options a fairly impressive income. Moreover, profit is made possible solely by reducing risks.
Any binary options broker never rules out the possibility of an unsuccessful closing of a transaction. It is possible to reduce the risks of probable failures by choosing the right trading platform and budgeting the costs of losses.
Brokers giving early closure can quickly close a losing trade. This way you can avoid more losses than you have already suffered. On average, at least 30% of transactions end at a loss. The percentage of failures largely depends on the skill of the trader. Having pledged 30% of the available budget for losses, you can independently control losses.
By mastering these simple hedging rules, you can significantly reduce the risks. It is important to understand that trading is not only successful transactions, but also losses. However, they can be minimized. This is the skill of the trader.