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Home > How Much to Invest in Binary Options

How Much to Invest in Binary Options

It is very clear that there is an inherent risk when it comes to binary options trading. This is because an inaccurate prediction regarding the direction of the price movement for an asset will result in a loss. As a result, you will be required to forfeit all of the money that you invested in a trade.

Now, this can be a bitter pill to swallow for most and certainly is not a pleasant thought to consider. Nonetheless, it is precisely these conditions that require you to have a particular amount to place on each trade. This leaves you with the question of how to know how much to invest in a binary options trade. Here are some factors to consider:

Think in Terms of Percentages, Not Amounts

The amount that you can invest in any one trade depends on the total capital in your account. This is all of the money at your disposal. However, if you lose this within a short period of time, you are unable to continue trading. Even if you replenish your account, you may be unable to recover these losses.

This is why you need to pace yourself. The best way to do this is to decide which percentage of your total account is expendable. In order to do this, you will have to make room to place as many future trades as possible, without depleting your account. Expert traders would advise that you stick with around 1 to 5 percent of the account.

The less money that you have in your account, the lower the percentage should be.

Calculate the Actual Amount

Once you have settled on the percentage, it is time to think in terms of dollars (or whatever currency is offered). For the sake of an example, let’s imagine that your account contains $1000. You have determined that one percent of this is the amount that you can stand to lose with each trade. Therefore, you will be investing no more than $10 in any given trade.

Now, it is not common for brokers to offer you a rebate. This is the feature that allows you to reclaim a small portion of your money, even though the trade ended out of the money for you. Of course, this return is often just a fraction of the initial investment.

Still, it is better than nothing. If there is a chance for you to get some of your money back, it is fine to increase the amount of money you are investing. However, this should be proportional to the rebate percentage. If you are assured 10 percent back, you can increase your investment up to $11. This is because you are guaranteed that you will receive $1 back, regardless.

Increasing or Decreasing Your Investment

If you really want to make a profit, you are probably aware that you are going to need to place more on some trades than others. This does mean taking on greater risk, however. If you wish to remain protected while doing so, it is best to wait until the total balance in your account has increased significantly.

This way, according to the policies stated above, you can increase the percentage and still remain within your safe zone.

How about when you hit a losing streak then? Well, if you are hoping to rebound from such circumstances, you are going to still need to invest a significant amount. This is the only way to win yourself back a profit that will cover the losses. This is true up to a certain extent, nonetheless. If you are account has depleted beyond a certain amount, it is best to reduce the amount of money you are placing on each trade.

This is the best answer for how to know how much to invest in a binary options trade. Remember, as long as you are smart about it, you will be able to manage your money well.