About Risk Management Strategy and its usefulness for options traders
In binary options trading there is a risk of negative transactions, as well as in all other types of trading. It’s impossible to protect yourself from losses fully. However, there are rules that will protect you from unplanned and inconsiderate loss of deposit. Binary options risks depend on the option, its liquidity and some other factors.
Risk management is the science, without which it is impossible to trade binary options. If you do not use risk management for binary trading, any binary option strategy may fail to be permanent and effective.
Binary options are not a game and not a casino, but in casino either you need to use the systems and strategies to manage your bankroll properly in order to win.
There are three main approaches to the risk control when trading binary options, namely:
- Management of the lot size
- Deposit / leverage
- Emotion control / positive trading psychology
Determination of the amount for trade. You should not trade on the entire amount. Dividing the amount may be on binary trading strategies or time of trading. Also, the amount should not be your last. You should not lose control because of one or two losing trades. Therefore, the amount is determined in early trading.
Risk Minimization is the right bet size control. Having made a deal for the whole amount of the deposit, you do not leave yourself a chance to earn on repeat positions. There is a statement that one transaction should be maximum 5% of the deposit.
Determination of the amount that we plan to earn, this is the main parameter in binary risk management. After all, there is no logic to risk $ 200 for earning $ 5.
The systematized trade or binary option strategy. Each strategy or trading system in binary options gives a definite result measured by the percentage of profitable transactions. If you change a strategy every 5 minutes, you will not get the desired result. Organize your work and your trading .
Risk strategy by the number of transactions per day. Determine in what trading session you are trading. Do not trade whenever you want, trade, when the market and your binary strategy allow it. Do not make 2000 trades a day. Trade until you are tired and are able to make rational decisions.
The conventional risk management rule adopted by professional traders tells that not more than 5% of the size of account must be set in the market at any time point. This means that if you have $ 1,000 in your account, you should not spend more than $ 50 on the market at any given time. It is extremely dangerous to trade a bigger sum, even more so, the type of binary options market is “all or nothing.”
Using Risk Management in binary options, you can get a mathematical advantage and start making money consistently. Good luck!
That’s all for now. Got any questions? Just ask the expert!