Best Practices For Making Money With Binary Option Trading
It is very possible to make money with binary options, but there are ways to go about it. Many traders go into binary options with the wrong attitude, the wrong mentality, the wrong tools and the wrong approach.
This article will therefore point out the best practices that traders should adopt when trying to make money from binary options.
Trade Just a Few, Familiar Assets at a Time
The binary options market is filled with hundreds of tradable assets. Some trades think that they will make more money by trading just about every asset that there is. This is just plain ridiculous.
The popular saying of being a “Jack of all trades and master of none” holds very true in binary options. You are better off trading a few assets that you know very well and become a master of these assets. For instance, it is usually easier for a US trader to understand the US stock markets and the listed US stocks in a few sectors than for the same trader to understand anything about the Turkish stock market.
You should be able to pick one or two assets and understand everything about the character of that asset. You will achieve better results working with a few assets than with working with many assets.
Use Low Risk
Sometimes, the markets may not present good opportunities. At that point in time, it is about survival and capital preservation. It is not good practice to use very high risk to try to hit home runs. Low risk means making sure that you do not commit more than 2% of your capital into active trades.
If you have $1,000 in your account, you should not trade with more than $20 at a time. If you lose the trade, you will still have $980 and you will only need to make 2.04% of $980 to go back to your initial capital of $1,000. But if you trade with 20% risk (using $200 in active trades) and you lose it all, you will need to make 25% of your remaining capital to get back to $1,000.
We see one trade, two different risk profiles and two completely different paths to recovery (one easier, the second a lot harder). This little demonstration shows how easy or difficult your journey can be in the binary options market with the right application of risk. Low risk is clearly just the way to go.
Use the Right Tools
To be able to trade binary options, you need to be able to analyze the asset you want to trade. For instance, you will need charts for technical analysis. These days, traders and programmers are now looking for better ways of implementing trades with as little manual input as possible. So trading bots are now coming into the market. News feeds are now coming into the market. So you really need to have the latest tools to help you trade smarter. There are many tools which can be obtained from the internet for free. These should be maximally exploited for your benefit.
Choose the Right Broker
The broker’s job is to hold the trader’s funds in trust, provide the trading platform and attend to deposits and withdrawal requests. It is a good thing that there is increased regulation of brokers now. Previously when the market was unregulated, it was chaos.
Many scam brokers took off with funds belonging to their clients. Even now, there are regulated brokers with very poor services and customer relations. You do not want anything to do with these brokers. Make sure you choose a broker that fulfills your expectations and attends to your trading needs.
Use Low-Capital Live Accounts for Training
It is good to use binary option demo accounts where you can, but demo accounts are limited. There is a different feel when real money is used for trading. It is therefore advisable that the trader takes a little money say $100, and tries out the real money side of the market as a training and learning experience. It is only when lessons have been learnt with small capital that the trader should move on to higher levels of capital. Some brokers provide the opportunity to trade with as low as $50.
These are some of the best practices to adopt in order to make money from the binary options market.