Create A Personalized Risk Management Plan
Part of the appeal of binary options trading is the ability to tightly control risk. While there are several general risk control methods that can be used by all who trade binaries, there also exists the chance to create a personalized plan that will further protect you. In doing so, you will ensure that you take on only the level of risk that you feel comfortable with. Nothing more, nothing less.
The place to start will be within your chosen trading platform. There you will be able to see the available instrument types and offered return rates. Typically, the larger the offered return, the higher the associated level of risk. Another way to sort the available options is to consider which are standard and which are high-yield. Generally, only One Touch options are in the high-yield category, but since every platform can be different, take the time to find out what’s what and steer clear of high-yield positions if you fear losing larger amounts of money.
Some do consider 60 Second trades to be riskier than other trades. The main reason for this is that these positions allow for money to be lost rather quickly. On the flip side, they can also offer fast profits. At the end of the day, low-risk use of this instrument is really about timing and use under optimal conditions. This can certainly be said of other trade types as well. Some traders find that they prefer one instrument above others. While too many limitations can prove detrimental, sticking with what works often does more good than harm.
Your chosen investment amounts say a lot about your risk appetite. Some traders only feel comfortable in risking $5 to $10 per trade, while others are willing to commit $50 to $100 or more to each contract. Maybe your preference falls somewhere in between these two extremes. In general, tight money management is recommended for novice traders. Few things are worse than draining your account quickly and having no profits to show for your deposit. The decision is up to you, of course, but do consider committing larger amounts to binary options trades only after you’ve gained some experience.
Refunds and trade insurance may need to be factored into your plan. While fewer brokers are now offering refunds on losing positions, some do still offer a small return of between 1% and 15%. Trade insurance is similar to a refund, offering some of the investment amount back if a position finishes out of the money. Although you never want to be on the losing end of a trade, some comfort can come from knowing that some of your investment amount will be returned if a loss does occur.
If you have yet to select a broker, now is the time to consider specifics such as minimum per-trade investment amounts, refunds (if any), return rates, and more. If you have already selected a broker and are not pleased with the options being presented to you, don’t be afraid to make a change. There are plenty of reliable options to choose from, so there should be no problem in making a switch. After narrowing down your choices, screen each service provider carefully. You will find that some are indeed better than others.
There is no form of trading that does not come without any risk. It is simply a part of the process of earning money from the markets. Everyone will have their own opinion about what makes them feel more or less secure when entering into investments. Creating your own plan will help to ensure that as you go about your binary options trading career, you remain in complete control of your finances.