We note that the use of this technique brings a number of advantages:
- The reduction of risks associated with the deposit.
- The establishment of clear rules of work and sequence of actions.
- The ability to determine the value of the trade lot correctly.
There are five main tenets that define trading style in terms of the volume of trading deposit, and the amount that the trader is willing to allocate as a rate buying Put or Call option.
So, at the forefront stands the deposit amount. This is the first thing a trader needs to define before he starts to trade binary options. It is on this level depends the volume of purchases of binary options.
Here it should be immediately noted that the greater initial deposit is, the more the trader can risk buying an option.
If you are a novice trader, we recommend you to use bonus programs that the brokers offer. It must be remembered that the bonuses impose certain restrictions on the trading account.
On the other hand, the size of the deposit in the formation of Money Management can be calculated starting from the amount of the transaction. In this case the trader can go the opposite way (it is not the size of the deposit determines the size of the transaction, but rather the size of the transaction will determine the size of the deposit). There is such a thing as a risk factor in trading. The most optimal value is its period between one and five percent. Moreover, this figure can vary depending on how skilled is the trader.
Calculation of the return from trade is also an important aspect if you apply a trading system “Money Management”. Any business, including work on the financial markets, involves planning. When the trader has determined the broker, he can pay attention to the coefficient the company offers in case of a profit, and what compensation may be if the trader makes a mistake in the analysis and incurs a loss. That is, in the planning process, you should pay attention to the income for a given month, if for example to do one or more successful transactions a day.
The same goes for those purchases that may be unprofitable. Often on the market you can see a situation when some brokers artificially lower interest payments on integer types of options or on specific underlying assets. To understand this, you can compare the rates of several brokerage firms.
As a result there is a situation which many traders do not pay attention to and believe that the decline in profitability, say, 5 percent won’t make a significant effect on trade. But it is not so. It affects the expected end result. Lowering interest rates substantially reduce the expected value of work.
That’s all for now. Got any questions? Just ask the expert!