How to minimize the risks of losing money when trading binary options

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How to minimize the risks of losing money when trading binary options?

Despite all the advantages of trading binary options in this mode of working with financial assets, like any other direction of trading, there is an indicator that has a critical impact on the end result of any trader’s work – it’s about financial risks! It’s the risks that do not allow you to achieve the goals set by the market participant and lead to a loss of investment capital. Most beginners and experienced traders faced such a problem. Today we offer for beginners of binary trading a list of recommendations – how to minimize the risks in trading binary options. We do not offer supernatural approaches or methods to reduce losses, but only recommend certain rules of conduct on the market that allow us to obtain the optimum risk regime.
So, let’s start from the very beginning and talk about the risks from the position of knowledge and experience. Most potentially successful investors lose their money in the first week of trading only because of excessive self-confidence. A familiar situation – I can, like that guy, earn fabulous money! I learned the instruction on drawing up options – what else do you need !? Yes, I can earn as much as I want! Well, other conclusions of this kind! Yes, with this start-up, the risks are simply incredibly high and the loss of the deposit is only a matter of time. Hence the first recommendation for minimizing risks – before completing your first real contract, thoroughly study all the techniques and approaches to option trading, as well as the very algorithm of the contract itself!

We go further, we will consider the statistics of trading operations. Many know that the growth of capital and the volume of profitability of trading depends on the number of issued rates with a positive outcome of the expiration. There is such a thing as a negative mathematical expectation, so in binary trading it is -15% with a maximum payout rate of 85%. It is these 15% of the difference between loss-making and profitability of contracts that eat up your deposit. Therefore, the main recommendation of professionals in effective trading is the use of highly efficient trading systems or forecasting (as you like more). In order for the investor’s capital to increase steadily, it is enough to execute more than 60% of contracts with profitable expiration. All is simple, so you will block losses from unprofitable rates and create conditions for the growth of investment funds. For example, a simple and uncomplicated system based on standard analysis indicators gives more than 80% of profitable contracts, which allows you to increase capital with high dynamics and always be in the positive area of ​​the account balance:

This will be the second recommendation on risk reduction techniques – always use the market valuation strategy – this will give you the opportunity to work in the market without critical losses of capital.
And finally, the financial indicators of trade. Here we are talking about the rules of money management and, directly, financial risks. Heard “Risk management” or “Money management”? Yes of course heard, but only if you have already merged your deposit, you just did not use these rules. Here everything is extremely simple and long calculated! To minimize risks, professional traders recommend choosing in each individual case a certain indicator of the value of options, which will have an optimal correlation with the efficiency of the strategy with the volume of trading capital. Standard values ​​of money management are considered to be the value of options, which is no more than 3-5% of the amount of capital. This mode of trading gives a completely normal level of risk, which allows you to earn earnings consistently, and not lose money. It is for this reason that most professional brokerage platforms set financial requirements for starting capital and the cost of options at a low level. For example – the best brokers, who are considered to be market leaders and technically advanced trading platforms, set a minimum deposit amount of 10 USD, and the value of contracts at the level of 1 USD. Thus, even on a minimally available trading account, it is relatively safe to trade options.

Let’s sum up. To minimize risks in binary trading, you need only a few logical things:

• Professional knowledge and experience in trading
• A working strategy with a good performance indicator
• Discipline in terms of financial management in the process of trading

If you follow these recommendations, your deposit will be safe!

“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”

Minimize Risks in Binary Options

Binary options trading is a risky investment, so you want to make sure that you take steps to minimize these risks. If trade carelessly, without taking any precaution steps, you will find yourself losing a lot of money. The following are seven tips on how you can reduce the risks in binary options trading.

1. Money Management

You have to get disciplined in money management, because you will be the one deciding how much money you want to invest into the binary trading. Getting disciplined in money managements means you are to set a limit for how many wins and losses are to be allowed in one day. You must, by no means, control yourself and stop trading when the limit you have proposed is reached. You can make a proposal to yourself to stop trading based on the number of wins/losses, percentage of losses, amount of wins/losses and winning ratio. For example, you can propose to yourself to stop trading when you win 10 times/lose 5 times.

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2. Trade on a Small Amount

As a rule of thumb, you should always trade in small amounts, no matter how high the ROI rate is. It can be tempting to invest all the money in your trading account when the broker offers a high ROI of 95%, but it is better not to do so. This is because you won’t make the right prediction every time in reality. For example, if you $300 in your account, you should start by just trading $30 in each trade. Trading in small amounts can help you to accumulate into a large amount of profits over time while minimizing your losses at the same time.

3. Choose a Broker with High Out-of-Money Rate

You should choose a broker that offers some refund for trades that end out-of-money. For example, the broker may offer a refund 10% for out of money trades. This means that you will get back 10% of the capital you invested, if you lose the trade. To find out how much return rate the broker offers, you can check the FAQ section or ask the representative.

4. Monitor the News in the Market

It is essential that you perform a research by using technical analysis tools and monitoring the news in the market, if you want to increase the chances of making a correct prediction. The source of the financial news you rely on, must be up to date. You should get educated on binary options trading by reading books and watching tutorial videos.

5. Implements Hedging Strategy

The hedging strategy requires you to place a trade in both, the call and put positions, to reduce the risks in a volatile market. You will have to predict the highest or lowest level within a certain trading period. The best trading period would be when the movement of the price is within the symmetric channel. You should place a put when the price touch the previous high resistant level and place a call when it touches the previous low support.

6. Choose a Broker with Sell Back Feature

There are a number of brokers that offer the sell back feature on the platform. The sell back feature allows you to end your trade prior to the expiry if you know that you have predicted the wrong direction and will lose. Using the sell back option can help you to get back a portion of your capital that range from 40% – 60%. Although you didn’t get back the full amount of your capital, you still manage to get back almost half of your capital. This is better than you end up with nothing in the event that your trade end out-of-money.

7. Diversify Your Portfolio

You can also reduce your risks by diversifying your trades across different types of asset classes. For example, you can trade on stocks while trading on forex currency pair on a single brokerage account. Apart from diversifying the asset classes, you should also diversify your trading strategies. You can implement both short term and long term trading strategies to reduce your risk.

The key to success in binary trading is to maintain a balance in between the profits and risks. You should always set a budget before executing a binary options trading activity.

How to Reduce the Risk of Losing Your Money with Binary Options Trading

There is no denying that there is no risk involved with binary options trading. In fact, you cannot find a form of investment that does not carry an inherent threat. The possibility of jeopardizing all of your savings does seem to be amplified with binary options, nonetheless. Fortunately, there are so many different ways to reduce the risk of losing your money with binary options trading. Simply follow the strategies below and you will providing yourself with an ample amount of security:

Make Sure Your Broker Offers Certain Features

There are two ways that a broker can help you out if it seems as though have made the wrong call on a trade. The first is known as an out-of-money rate. As you are probably aware one of the biggest issues with binary options trades is that you can lose all of your investment. Fortunately, there is a way to ensure that you get some of this amount back.

The out-of-money feature is one where the broker returns a small percentage of your investment. This tends to be about 10 percent. Get yourself a broker that gives you one of the highest rates around and you will be able to make some money back.

The other service is known as the sell back feature. This is something that you can employ if you notice that you have made the wrong call and are about to lose your money. This feature allows you to exit the trade before the expiry time. By doing so, you will be forfeiting between 40 to 60 percent of your initial. When considering the alternative, however, this is quite a good option.

Utilize the Straddle Strategy

Volatility in an asset can prove to be disastrous for a trade. That is, however, unless you use the straddle strategy. With this strategy, you are almost literally hedging your bets. This is because you put both a call as well as put option on the same asset.

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This way, regardless of the way that the asset moves, you are bound to be right. Of course, there is a caveat with this. As you are both predicting that the value will rise and drop, you are bound to be wrong on one occasion. This means that you stand to lose some money. To utilize this strategy properly, you will have to ensure that you are making more money with the trade that you will win.

Manage Your Money

In the end, perhaps the easiest and best way to minimize your losses is to manage your money well. This means creating a plan for yourself even before you start trading. In order to do so, you will have to come to the conclusion that regardless of what an experienced trader you are, you are going to lose. Sometimes, you may encounter a series of losses. While you cannot control this, you can control how much you will exhaust in the process.

It is up to you, how you decide this. For instance, you can decide that you will stop trading once you have lost a particular amount. Or, you may decide to take a break once you have reached a set win/loss ratio. All that is important is that you know when to stop.

This is how to reduce the risk of losing your money with binary options trading. These are not foolproof methods but will certain put the odds in your favor.

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  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Good for Beginners!
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    Get Your Sign-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

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