3 things to take in to account trading binary options

Binary options is based on the very simply decision of whether price will close higher or lower than the current market price at a chosen expiry time. Although this seems like a very simple decision, with a 50-50 chance of success, there are a number of things to take in to account to try to ensure a higher probability of making the correct decision.

Trade with the highest payout

If the chances of being correct, higher or lower, are 50-50 then it would be reasonable to think that even random trading decisions would yield an equal profit to loss ratio over time. However, this also assumes that the winnings would be equal to losses and that options expiring ‘in the money’ would profit from the same amount as a position ‘out of the money’ loses. Unfortunately, this is not the case as most binary options brokers will provide pay-outs of around 80%, whilst losing positions will often wipe out 100% of the investment.
There are two ways, however, to mitigate this automatic edge that the brokers have by choosing to only trade binary options with brokers offering an ‘insurance rate’ for losing trades. This rate is usually up to 15% of the investment value which is returned to the trader on positions closing out of the money. This means that, with winnings of 80%, losses would be limited to 85% which will positively affect a trading account in the long run.

Choosing a binary options market

All traders need to ensure that they have as many factors on their side as possible when looking to be consistently profitable. It may seem straightforward, therefore, to point out that binary options traders should choose the market/s that they are going to trade very carefully. Getting to know how a market moves can be very helpful when investing in binary options and a good understanding of when markets are most active is essential for planning the expiry time with binary options.
For those trading in their spare time, during the morning or evenings or with other commitments throughout the day, trading forex and commodity markets is likely going to be preferable to stock markets. Expiry times can be set from as low as 60 seconds to a number of days and selecting the appropriate market based on a traders preferred time of day can be essential to protect trading capital. For those fortunate enough to be able to monitor positions throughout the day, using mobile apps provided by almost all brokers, binary options can be closed early, allowing profits to be take, or rolled-over when a positions begins to look risky.

Limit trade size

Over trading is a common way to deplete a trading account alongside the size of the investment made on each binary options investment. Despite the temptation to over-invest in a ‘certain’ trade setup, professional traders will always advise to limit potential losses to a percentage lower than 5% of the total trading capital available. This may seem like the boring options when returns of up to 80% can be made in just 60 seconds, but it will prevent the ability to blow a trading account within just a few large binary options trades.