The key to mastering the art of binary options trading is to have an effective and efficient budget management strategy. To do this, the first thing you need to consider is the maximum limit that you should risk in a trade. You have to know how to minimize your losses, which is just as critical as your capability to handle winning trades.
Based on the principles of Forex trading, binary options trading is designed to be simple and easy-to-understand. This allows anyone, both inexperienced and professional traders, equal opportunities to trade currency pairs as well as other assets, namely stocks, commodities, and indices.
Here are some budget management strategies you can apply when trading binary options:
Strategy 1: 50% of available capital
As the name states, this strategy recommends using not more than 50% of your available capital when you start trading. This way, you can always have money at hand even if your trades end out-of-the-money. Furthermore, investing only 50% or less of your capital minimizes the risk of losing huge sums of money in one go.
Strategy 2: Stick to your budget
Yes, it’s as simple as that. Just follow your predetermined budget for trading and exercise discipline when sticking to this budget. Remember that your budget management attempt is to save you from losing your entire money, so when you reach this budget limit that you’ve set, stop trading for the day and continue the next day instead.
Strategy 3: Never borrow money for trading
Because of the binary nature of this industry, borrowing money for your capital is highly discouraged. When you buy an option, you get a 50-50 chance to gain profit or lose your investment. If you’re unlucky, then your trade might end out-of-the-money. How, then, can you pay for your borrowed money?
These budget management strategies are just the basic ones. There are many more strategies you can apply when trading binary options. Choose a strategy you might like and use it wisely.