Money management in Binary Options trading system
Every experienced trader knows that the key to a productive trade in the financial markets is the presence of the following three crucial components: it is the presence of a reliable trading system, strict self-discipline and effective money management. Indeed, the combination of these factors determines the prospects of any successful trading, including trading in the binary options.
As a part of this review we will talk about money management in details and try to understand how we can optimize our work with the personal funds in the most accurate way, as well as will give some practical tips that can serve both the beginners and more experienced binary options traders.
First, we will reveal the contents of the money management concept. Money Management is a process of the optimal and strategically calibrated cash management in order to maximize profits. Despite the fact that this approach is a key and mandatory one, it can be said – even one of the fundamental factors of successful trading in the financial markets, money management is often deprived of attention, as something self-explanatory.
In fact, as many newcomers say, “there must be a balanced approach to the deposit management” and then they make ten trades and one losing, which “eats” all the profits. And only then, left without money, people start looking for information about how to manage the capital properly and understand that the success of trade is determined by long-term profit making, and that experienced traders often have to make three or four losing trades in order to feel the trend, adjust the strategy and cover the loss for one or two profitable deals. So, in fact, money management is a science of effective management of your personal deposit for a successful and long-term trade.
To start with, we give some of the most common recommendations for the effective deposit management.
Indeed, there is only one recommendation at this stage of the review, but we’ll talk about it in detail. So it says: “Do not sell a deal more than 2% -5% of the total amount of the deposit.” For example, if the amount of your deposit is $ 500, the transaction does not exceed $ 25, and regardless of whether you are trading profitably or a loss, the interest rate is still fixed in the range of $ 10- $ 25.
Do not neglect this rule of money management no matter what. Over time, when feeling more confident, you can raise the interest rate, for example, to the range of 5% to 7% or even up to 10%, but never go beyond your set range; it will instill the necessary discipline and protect your funds from emotional waste. Sometimes it will be very difficult to resist, as it seems to be an obviously profitable deal, but you have to overcome yourself even in such conditions. As the saying goes: “Slow steady wins the race.”
Next, let’s talk about some of the structural specifics of money management, or you can even say, the key principles of money management, which should be in the mind of every trader.
For a start – here is a little plan under which we will develop the theme. And so we will examine what the following things really mean:
And, in the end, we emphasize once again that the art of money management perfectly complements the inventory of the most effective trading strategies, as well as increases the level of necessary discipline and the overall financial culture. Learn to manage the risks, dear friends, and do not let the risks manage you!
That’s all for now. Got any questions? Just ask the expert!