Binary Options Money Management
10 Simple, But Very "Expensive" Rules Every Trader Should Keep In Mind
Money Management is The Most important skill a trader can learn - it Changes the Game..
10 MUST-FOLLOW Trading Rules:
Do not become too emotional with your trading
Never become emotionally involved in trading. Greed and fear are your greatest enemies and have a terrible impact on trading. Fear of losing causes severe losses and excessive greed makes you go for more even if the best strategy is to stop. Emotions make a trader deviate from plan, resulting in issues like ego or revenge trading.
Risk MUST be predetermined
Risk capital is an amount which you can afford to lose by not affecting your lifestyle. The best time to calculate risk is before placing the trade - when the mind isn't clouded and decisions stay unbiased by price action. You must understand the worst-case scenario, and place a stop based on a technical level.
Make the Trend Your Friend
Trends last for days, weeks or months. That's why most black box models in the market focus solely on trends. Range trading may yield good profits, hefty amounts of money is concentrated on trends. In a range-bound market, you gain by the first lot and stop at breakeven on second lot. When a trend emerges, just hold the second lot and become a winner.
Trading Is More Art Than Science
Artistic efforts involve talent. Smart traders polish their skills through application and discipline. Just set your goals and select a trading style that's attuned with those objectives. Ensure that your temperament matches with the chosen style.
Plan Your Entry and Exit and Stick To It
Trigger fundamentally but enter and exit technically - this is the key. Technical analysis is based on forecast of the future employing past price movements whereas fundamentals include global political and economic news to decide the asset's future value. Just know the benefit of each and the time to use them.
When it comes to trading, patience truly is a virtue
Markets are volatile. Prices and trends are not predictable. So patience is the most important element in a trader's mindset. Patience can save a trader from investments that turn out to be bad bets.
The Stop-Loss & Take Profit
Protect your profits and Trailing Your Stops! This combination will make you win. A daily overall number of wins or loses must be limited. Once you reach one of those limits, you would stop trading. Trailing stop allows you to indicate the amount you're ready to lose without limiting the profits you would take. Before you trade, know where your stop loss or profit target is.
Never risk more than 5% per trade
This is the most common way to lose money. Statistics show that the highest amount a trader can afford to lose in a trade is 5% of total capital, without damaging profit potential. Traders become greedy and attempt to earn huge profits over a short time span. An investor risking 25% of his investment portfolio on one trade, loses it after a small series of losing trades.
The total risk of all open positions must not exceed 15%
Market risk is managed by the proportion of your capital invested in a given market phase. Investing more than 15% of the capital is unrealistic to achieve gains, but a trader becomes susceptible to losses.
Risk Only What You Can Afford to Lose
Every investment portfolio entails a high-risk, high-reward trait. But you must allocate as much as you'd be comfortable to lose overnight. Only a tiny portion of your portfolio must be exposed to the trades.
Capital Management / Money Management Strategy lets you skip bad habits that lead to costly mistakes.
This guide is designed to help you develop a logical, intelligent approach to binary trading based on 10 Key Rules.
Money management cannot ensure that you always make spectacular returns, but helps you limit losses and maximize your gains. Proper Capital Management focuses on keeping your losses low and your potential profit High.
Every trade - simply an educated guess. Nothing is certain in trading. There are too many external factors that can shift the movement of the asset price.