Any experienced trader will tell you that if you want to continue trading with binary options, you need to know how to manage your money.
This will help to ensure that, on average, you are making more than you are losing. It will also make certain that you don’t develop any bad trading habits that could cause you to spend all of your money.
Here is a guide to managing your cash flow with binary options trading:
Living Expenses are Primary, Trading is Secondary
You should never give binary options trading more importance in terms of expenses that you need to take care of. When you get paid each month, the first you need to do is to set aside money for you rent, utilities, food, transport, etc.
Think of this as an untouchable fund. Under no circumstances should you ever take money from this fund.
You should also never take out loans or borrow money from people to trade with. This is because there is always the possibility that you could lose that entire money. There is also no guarantee that you will be able to make it back. It is vital that you think of trading as secondary income – it should always make you more money than cost you.
Calculate Affordable Losses
The first question you will need to ask yourself with binary options is, how much can you stand to lose? Now, this is not based on all of the money that you have in total. Instead, it is dependent on how much money there is in your trading account: you can use indicators.
The money that you have there, should be able to last you for a good number of trades.
For accounts with higher amounts, you can decide to place no more than one percent on each trade.
If you aren’t starting off with a lot of capital, you can increase this number to around three percent. Whatever you choose, there should still be a healthy sum left in your account.
Adjust Investment According to Strategy
Each strategy has its own level of risk attached. The risk is usually offset by the profit that you stand to make.
The strategies that have only minimal risk may not be able to make you as much of a profit. At the same time, the riskier strategies can also result in you losing all of your money. A good way to balance the risk and your strategy is to increase investments for the less risky endeavors and reduce money for the riskier ones.
If you are wondering how to determine the risk involved with your strategy, just look at its win percentage. How much of the time does your strategy end in in the money trades?
Be Flexible with Your Trades
It is foolhardy to continue to only place a set amount of money on each trade. You need to know when to increase your investment or to decrease it.
If you are in a rut and happen to be losing trades consecutively, you should decrease how much money you are placing on the trades. However, if you do see a good opportunity, you should elevate the investment somewhat.
It is important to avoid being too extreme in either of these directions, however. It is important to analyze each trade and to determine whether your original formula works or if it can stand to be tweaked.
This is a good guide to managing your cash flow with binary options trading. Don’t be afraid to reevaluate your money management system every so often, however, if you feel as though it is not working for you.