How Much Capital Do You Need for Binary Options Trading?

capital needed

It can be a little confusing to determine how much money you need when trading with binary options.

On one hand, there are brokers who ask for little to no money to sign up with them. Then, you have others that ask for considerable sums so that you can make a greater profit.

This can make you question how much capital you need for binary options trading.

While the answer isn’t straightforward, some of the information below may help to give you a better idea of what you will require:

The “Just Right” Amount

It is important not to think in terms of extremes when deciding on how much capital you will need. Traders tend to start off one of two ways – they either have a lot of money in their account or very little. Both these options can set you up for failure, unfortunately. Take having the bear minimum in your account, for instance. This means that you will only be able to make the smallest investment in your trade.

In return, if the trade ends in the money, you barely make a profit.

If you continue in this manner, you will lose only small amounts but you may gain even less. Therefore, it won’t really make sense to trade at all.

Now let’s look at having a large amount of capital in your account. As you now, there is a certain amount of risk with binary options, and that you will lose money every so often. The more money that there is in your account, the more you will be tempted to trade with and then eventually lose it.

This usually happens when you are chasing losses. As you can see, somewhere in the middle, is your best avenue. Of course, what this middle ground is depends on how much money you have at your disposal.

What is Your Financial Goal?

Before you start trading, consider how much you want to make out of this venture. Of course, it can be difficult to difficult to decide on an absolute number but you should try to come up with a realistic goal. Let’s imagine for a moment that you want to make a thousand dollars by the end of the year. During this time, you hope to place twenty trades.

What you need to factor into this equation is the payout rate of your broker. This will determine how much you stand to gain from any one trade.

It is a good idea to remember that you are likely to lose at least half of the trades that you do place, just to be on the safe side. So, for the sake of argument, let’s say that you have about ten trades to make thousand dollars, with a payout rate of 80 percent.

This will give you a good idea of how much you will need to start with if you hope to meet your goal.

Tailor the Amount as You Go

The truth of the matter is, however, that it can be difficult to pinpoint just how much capital you should start with.

It is only once you have begun trading that you have a better idea of how much you need. Therefore, it is quite alright to either increase or decrease the amount that you initially started with.

You should never trade with more than you can afford, nonetheless. Also, don’t make any drastic changes to the money in your account. Also increase or reduce the money you are trading with slowly.

This should give you an idea of how capital you need for binary options trading. Remember, it varies from trader to trader so you should only use as much money as you are comfortable with.