Trading binary options is a popular and interesting trading concept. There are millions of users all over the world, and many of them are quite successful in it. Even though the concept is quite simple, it is important to be informed and educated about market conditions and market analysis. Another key to successful trading is managing your finances, and in this article we will deal with some money management strategies.
Why is it important to apply a money management strategy?
Money management is important for several reasons. First, it helps you control the expenses and reduce the amount of money you lose. Second, it keeps you disciplined. Applying a certain money management strategy helps you stay within the frames you determined for yourself. And third, a proper strategy can also increase your earnings. Keep in mind that it is more difficult to apply a certain strategy if you use a binary robot or a money system like Millionaire Blueprint or something similar. However, with manual trading, these strategies are more than useful.
This is the most used money management strategy, especially among novice binary traders. It involves choosing both of the two options, so you can minimize the loss of money. With this strategy, you invest a certain amount of money to call an option and determine one time frame, but also invest the same amount of money to put the option and determine different time frame. This tactics is especially useful in the markets with high fluctuations, such as oil, gas and energy market.
This strategy is usually used by more experienced traders. We can say this is the opposite of the previous strategy. It also involves trading the same asset within two time frames – but you should choose the same option both times. Therefore, instead of calling and put an option simultaneously, you will either call it or put it in both trades. In order to do this, you should know the market well enough and be able to predict the fluctuation in prices with high precision.
This is also a strategy chosen mainly by experienced and highly skilled traders. It involves predicting that the change of price of one asset will change the price of the other. For example, if a price of oil rises, the price of some other commodities is likely to rise as well, such as oil or natural gas.
With such presupposition, the traders can trade binary options of all related assets. Just like the previous strategy, this one also requires knowing the market well enough to predict the changes, as well as cause and effect of changes.
The previous strategies are the most common and the most popular one in the world of binary trading. Naturally, if none of them works for you, you are encouraged to create a strategy of your own. You can base it on some of the known principles and change the details so they work for you.