Implementing an effective money management strategy, when trading in Binary Options, should be an essential component of any successful trading regime. Without it, you may end up losing a substantial amount of money in a short space of time, and could lose complete control of your finances. Whilst there is some element of risk in Binary Options trading, managing this risk and having appropriate discipline with regard to your money is vital, and will make your entire trading experience smoother in the long-run.
So, if you’re looking for extra tips on how to manage your money effectively when trading, keep reading and you’ll discover a comprehensive list of money managing strategies you can start using right away!
Remain disciplined at ALL TIMES
Whilst this may seem obvious to a lot of you reading this, you may be surprised at the amount of traders who think they ‘know enough’ to trade successfully, whilst completely ignoring the concept of remaining disciplined with their money. Poor money management can lead to massive losses, and leaves the trader in a very difficult, unpleasant situation.
Yes, you’re trading with your own money and have the right to do whatever you want with your funds. But, if you really want to make serious profits in binary options, you must meticulously follow your trading strategies and remain disciplined no matter how tempted you may be to deviate.
Here are a few simple money management strategies you can use to establish a plan that works for you:
Amount of losses and wins
A very common management strategy used by a wide variety of traders, it’s simple and easy to create and implement. This money management requires you to define a daily number of total wins and total losses – this will be your limit. Once you’ve reached this limit, you must stop trading straight away regardless of how successful your trades appear to be.
For example, you may plan to win 12 times per day. Once this limit is achieved, it’s important that you stop as you may get caught in the heat of the moment and become reckless. This could potentially undo all 12 of your successful trades, and you could lose some serious money.
In addition to specifying an amount of wins, you should also specify an amount of losses too. If you only establish a winning amount, you could lose a substantial amount of trades in the process of trying to achieve your 12 wins. However, if you propose to lose 12 times too, you’ll be able to prevent yourself from chasing your money if you stick to this number and stop when it’s achieved.
Extremely similar to the above money management strategy, implementing percentages has the same basic foundation but you establish a specific percentage of trades you want to win. This doesn’t limit the amount of trades you can carry out but, like the above strategy, once you’ve reached your proposed percentage it’s vital you stop right away to avoid the temptation to be reckless.
Amount of individual trades
Perhaps the simplest strategy of them all, this only requires you to specify an exact number of trades to execute throughout the day regardless of wins or losses. Whilst this is very simple, it can be harder for traders to have the will power to stop immediately once their proposed number has been reached, especially if they’ve lost more than won. However, the basic principle of this strategy remains the same as all the others; sticking to your plan will result in more success in the long-run, and will prevent unnecessary risks being taken that could be detrimental to your profits.
Money Management as a part of your Strategy
When trading in binary options, it’s important you establish a money management strategy that works for you. Everyone will have their own individual preferences, so it’s important to find something you’re comfortable with. In fact, you don’t even have to rigidly stick to using just one strategy! You can easily combine a couple of strategies if you want to, meaning you can tailor your money-management plan to flexibly fit your personality and trading style.
So, if you aren’t already, go ahead and try one of these strategies with your trading today, and get ready to watch your success skyrocket!
As always with binary options, remember that you need to stay up to date and keep learning. For this Stern Options has developed their academy. You can read about it on our review page here.