Binary Options Risk Management 101

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  • Binarium
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    Best Binary Options Broker!
    Perfect For Beginners!
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  • Binomo
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    Good Choice For Experienced Traders!

Risk Management

It is necessary to understand that risk is associated with everything in our life (accidents, illnesses, etc.).

Investments in general, and Binary Options in particular, also have an associated risk. The value of this risk can be measured, and normally the bigger the risk the bigger the potential profit.

Using a bank deposit as an example, we can say that the risk is low, and so is the return or profit.

When we talk about investments that we are managing (trading) ourselves, then we need to know how to manage the risk. Risk management is important for investments in the stock market, in Forex, in Binary options or any other financial instrument.

The basics of risk management are understanding and evaluating the following:

– What is the value of my portfolio

– What percentage of my portfolio that can be exposed, or at risk, in every trade

– In the case of Stop Loss and Take Profit parameters, where should they be placed (this does not apply to binary options)

– Which financial leverage do I use (this does not apply to binary options)

In the case of binary options, as you can see by the above, risk management is simpler because we only we have to calculate what value to invest, taking into account the value of the portfolio.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Sign-up Bonus:

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

If for example, we were trading in FOREX, we would have to take into account Stop Loss and Financial Leverage, in addition to the value of the Percentage-in-Point, etc.

This is why I think an inexperienced trader must first learn to trade binary options and not FOREX, or other more complex financial instruments.

Tips from our Professional Trader: 6 reasons to have 2 accounts

Do you know that you should work with more than 1 broker?
Check the 6 reasons why you should have account with at least 2 brokers:
  1. Each platform has its differences. If you try different platforms you may find those more suitable to your trading style.
  2. Each broker has his own payouts that keep changing during the day. If you want to open a trade and one offers 60% and the other 80%, you will choose the one with best payout, no?
  3. Sometimes the brokers close some assets, if you have just one account and you want to trade on that asset and it is closed, you will LOSE that trade, no?
  4. If there is an issue with your Broker’s platform, or they are updating it you’re not able to trade, unless you have another account with other broker.
  5. Deposits and withdraws. Brokers keep changing the deposit and withdraw methods, imagine you need cash fast and your withdraw system is closed at that moment on your broker, what do you do?
  6. Each platform has its owns indicators and trading tools, imagine you found a new stratey and it does not work on your broker because it uses an indicator that your broker does not offer.

Below you can find our main trader suggestions on brokers:

How to manage risk in Binary Options?

Taking into account the value of my portfolio I should calculate the trade as follows:

a) Experienced Traders – Each order should be worth 5% to 10% of the portfolio. If I have an account with $500 each order should be valued at $25 to $50.

B) Inexperienced Traders – Each order should be worth 1% to 2% of the portfolio. If I have an account with $500 each order should be valued at $5 to $10.

For this reason, when choosing a broker you have to keep in mind two very important things for your risk management:

The minimum trade value in the Broker
The amount you intend to deposit

Example of a Broker with low trave value: IQ Option

Imagine that the value of a minimum transaction is $ 25 and you want to deposit $ 250. Each transaction would be at least 10% of your account, which is well above that 2% maximum for a beginner.

Operating with 10% was going against the rule of risk management. The other solution to continue to respect risk management in this same broker would be to increase your deposit.

As a trader learns and acquires experience, he can increase the value of the orders because the chance of losing those orders will be smaller.

One of the reasons for using risk management is to avoid the total loss of the portfolio.

Imagine that you are an inexperienced trader and that you have an account of $100.

Imagine further that every order that you place has a value of $25. This means that if you have a loss on four consecutive orders, you will run out of money.

It’s not normal to have a loss on so many consecutive orders, but it can happen.

But if you have an account with $250, and you place a $5 (2%) order, if you have a loss on those four consecutive orders, you only lost $20, and still have $210.

Risk Management = Protection of your account

The idea of risk management is to know how many losses I can have without putting the account at risk, thinking that the mo re inexperienced I am, the m ore likely I am to have losses on trades.

Of course a lower risk implies a lower profit as explained at the beginning of the article. A $25 order returns more profit than a $5 order.

I am of the opinion that it is preferable to earn less and have less risk than to risk too much and end up losing the money.

Many people who complain of Binary Options, FOREX, or even the Stock Market, do so because they lost their money.

In many of these cases, it was incorrect risk management that led to the account’s rapid loss of control.

It is important to realize that in a $250 account if I trade at $25 each time, and I have two losses in a row ($50), it corresponds to 20% of my account.

It is very easy after that to become afraid and not do things rationally which usually leads to losing the remainder quickly.

And of course, then it’s easier to say it’s all a scam or a fraud than to admit that emoti o ns and risk mismanagement g ot the better of us!

I would like to remind you again of my advice:

If you have losses on 3 consecutive orders, stop trading. Analyze the trades with losses.

Check if your strategy is failing, or whether it needs some adaptation. Come back the next day.

Манименеджмент или бинарные опционы без риска

Управление капиталом при совершении трейда бинарных опционов является одной из важнейших задач каждого, кто желает получать прибыль в этом виде инвестиционной деятельности. Говоря о мани менеджменте, трейдер бинарных опционов всегда должен понимать, что под этим понятием подразумевается умное управление средствами с соблюдением риск менеджмента в своей торговле. Именно риски играют ключевую роль в получении прибыли или наоборот – убытка в торговле бинарными опционами.

Первое, с чего нужно начать трейдеру, который уже знает, как работают бинарные опционы – это определить размер своего стартового депозита. Такая задача является непростой, ведь практически каждый желающий заработать на трейде бинарных опционов хочет получать хорошее вознаграждение. Потому при анализе графиков для бинарных опционов, перед тем как открывать сделку, трейдеру нужно знать, какую сумму он готов потерять, в случае если что-то пойдет не так, как он планировал.

Если для трейдера бинарных опционов потеря нескольких сотен долларов не будет особо ощутимой, то такая сумма вполне может служить его стартовым капиталом.

Нужно помнить, что в успешной торговле бинарными опционами обучение играет очень важную роль. Потому прежде, чем начинать торговать собственным капиталом, лучше всего проверять свои силы на бинарных опционах демо. Чем больше трейдер будет анализировать графики для бинарных опционов, тем скорее он сможет выработать свои стратегии бинарных опционов, которые будут отвечать оптимальным характеристикам соотношения риска и прибыли.

В торговле бинарными опционами нужно всегда планировать сумму прибыли, которую вы желаете получить. Кроме того, для себя нужно прописать определенные правила, согласно которым по получению желаемого результата вы будете останавливать
торговлю. Это один из обязательных элементов мани менеджмента, который позволяет трейдеру уйти от азарта и остановится при достижении своей поставленной цели. Торгуя бинарными опционами без таких правил, часто бывает так, что трейдер все заработанное теряет и потом жалеет, что не остановился ранее.

Также нужно установить для себя правило остановки торговли в случае серии убытков. Это поможет вам ограничивать возможные потери на счете, когда стратегия бинарных опционов дала сбой. Торгуя бинарными опционами без этого правила, вы рискуете уйти в большую просадку, или, что еще хуже, слить свой торговый депозит.

Нельзя обойти мимо также такое понятие, как диверсификация рисков. Это торговля на разных инструментах. Часто бывает так, что трейдер, узнав, как работают бинарные опционы, сразу начинает торговать одновременно на нескольких финансовых инструментах. Хорошо, когда он использует торговлю бинарными опционами с минимальным риском. Но в большинстве случаев все наоборот. Начинающие трейдеры торгуют одновременно на нескольких инструментах, закладывая в сделку по 5-10 %, чтобы получить хорошую прибыль, но в результате получают наоборот – быстрый и большой убыток.

Потому очень важную роль играет торговля бинарными опционами с минимальным риском. Закладывая в сделку, например, 1% , и торгуя одновременно на трех инструментах, трейдер будет рисковать всего лишь 3% от депозита, но никак не 15-30%. Все эти моменты нужно поначалу хорошо попрактиковать на бинарных опционах демо, где и проверить, как трейдер прошел обучение бинарным опционам. Если результат торговли на виртуальных деньгах будет положительный, тогда можно будет смело приступать и к торговле с реальным капиталом.

Risk Management in Binary Options

When you invest your bitcoins, there is always some sort of risk involved. Binary options, just like any other form of financial trading, is no different. You could lose most of your invested capital, if you are too careless or greedy. The proper model of risk management (sometimes called bank management) is something you are expected to consider as soon as you start your binary options trading experience. We will base our analysis on BitPlutos platform, the very first binary options platform running exclusively on bitcoins.

The widely accepted bank management rule adopted universally by professional binary options traders is that no more than 5% of the account size should be invested in the assets at any given point in time. So, if 2 BTC is your current balance, you should not invest more than 0.1 BTC at any given time. Trading anything more than this is already thought of as “risky”. Losing 50% of your trading capital is different to losing only 5%, isn’t it? This is very important, keep that in mind and you should never go bankrupt when trading binary options with BitPlutos, otherwise you will fall prey to what we all want to avoid when trading – gambling.

Trading at BitPlutos is pretty much like forex where you can minimize your losses early if you see that you are likely to go “out-of-the-money”. In general, BitPlutos is the broker that gives back up to 15% of invested capital in trades that are out of the money (dependent on asset), but if you intend on complying with the risk management rules, you will also need to use other tools which will be discussed below.

Roll-Over

Imagine you’ve opened a new trade, and it’s going to expire in 30 minutes. You’ve been in-the-money so far. Suddenly, notice that the asset you’ve invested in is now starting to change its direction and you are now out-of-the-money and you see no reason that the trend is going to stop. This is where Roll-over comes into play. What does it mean and how does it work? It means that you can extend your expiry time. You’ll be asked to add a certain percentage to your investment, usually 30% of your initial investment amount. But there is also the advantage of it – If your option expires “in-the-money” at the end of that period, you win more money (your initial investment + 30% extra are now your basic investment, remember?).

Check out the screen below to see where the Roll-over tool is located (search for “Open Positions” below the trading platform)

After clicking “Roll-over”, you just have to select a new expiry time. Below it, you can see you the new investment amount (30% extra)

A few points to remember:

  • the Roll-over feature is available only for Binary that are out-of-the-money
  • there is a time period when you can use the Roll-over, usually it is terminated 10 minutes before the expiry
  • you can use the feature only once per trade
  • when properly used, it may minimize your losses and let you bounce back when market volatility occurs

Double Up

Doubling up is a similar concept to the Roll-over. You’ve probably guess it right – you double your investment. So one can either make bitcoins very fast or lose them very fast – it all depends on whether the trade goes in one’s favor or not. There are two situations that are suitable for Doubling Up :

  • the trend is steady and in your favor: keep up with it and open another pro-trend position. Mind you: avoid charts that show rapid market movements. Only steady trends (lasting for at least 1 hour) are to be used here!
  • a trend correction is about to happen: you opened a trade but you were not right about it, you are out-of-the-money. But from the chart your can clearly see that the correction is almost here. Double it up – it should compensate for your first loss as the system opens another option with the same direction but a different strike price (the current one).

Check out the screen below to see where the Double Up tool is located (search for “Open Positions” below the trading platform)

Check the current asset rate (strike price) and decide if you want to double it up with the same amount (1 BTC).

A few points to remember:

  • the Double Up feature is available for most of the option types
  • you can use the feature only multiple times per trade
  • when properly used, it may maximize your profits and compensate for losses

The opportunity to sell one’s position is highly underestimated by traders. People’s greed usually takes over the safe yet less profitable trades. This is a wrong approach though. In fact, selling your position at the right time can guarantee you constant profits. They are substantially lower than the regular binary options profits but they are pretty much assured.

First off all, you can use the Sell tool to get rid of the option that is out-of-the-money. Obviously, the price offered to you will be substantially lower that your initial investment, but at least you will not lose the whole amount. And the price is 100% dependent of the current market situation: the more you lose, the worse price you get. And vice-versa.

But what if your option is in-the-money? Well, this is when the real fun begins. Yes, you can sell it too! And get your profits, relatively small, but without waiting for the expiry. The price you get is also reliant on the market situation and will never be as high as if you waited patiently for your option to expire, but your profits are way more secure this way. Just wait for you option to be in-the-money and check for how much you can sell it.

Check out the screen below to see where the Sell tool is located (search for “Open Positions” below the trading platform)

Check the current price that you can sell the option for and decide within 3 seconds what you want to do (the price is always on the move due to the market conditions, you can reload though). As you can see, you already get 15% from your option.

A few points to remember:

  • the Sell feature is available only for some of binary options types
  • there is a time period when you can use the Sell feature usually it is terminated 10 minutes before the expiry
  • when properly used, it may minimize your losses and let you gain small but consistent profits. Perfect for patient investors

Important: availability of the above discussed tools may vary depending on the type of binary options you choose to trade.

But how shall one figure out whether to double up, use the rollover tool, sell it or go on with the investment already made?

It’s a question of bank management. For some traders, it’s simplest to avoid rollover or doubling up and continue with being very consistent about their investment amounts. Other traders love these features – they’re good at taking advantage of good opportunities when they arise (double up) or using Roll-over as the last resort. It is all a matter of practice. We recommend practicing on historical data and consulting your Account Manager before establishing your trading strategy. Different methods call for different techniques, and different personalities are suited by different money management styles. The only way to find out what’s best for you is to test for yourself.

We all hope to win but the truth is that there will be times when we make bad trade calls. No one is perfect, don’t expect to be either. It has happened to everyone; even the greatest investors suck at times. But what separates those who re-emerge as successful traders from the rest is the ability to control their risk. Please control yours too.

And we have a very special gift or all the readers: sign up now and get NO RISK trades with BitPlutos! What does it mean? It means that the broker will return your lost trades back to your trading account! The amount of no risk trades is negotiable and depends on your initial deposit. For those who feel more comfortable, the broker offers up to 100% Welcome Bonus. Just open your account with one click below!

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Sign-up Bonus:

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

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