Trading in the futures market as, however, and speculative operations by other financial instruments are associated with a high risk indicator that can lead an unprofessional trader to a complete loss of investment funds. Probably, we will not open a secret if we say that any online investor faced losses and critical losses of capital, which threatened to completely withdraw from the market. In most cases, this is associated with financial indicators of trading conditions, the level of mathematical expectation of unprofitable trading rates, technical problems in the analysis of quotations and certain psychological factors that accompany trading in the futures market. Against this background, there is a need for proper management, the task of which is the formation of rules for managing operating capital and risks in the process of trading. This is the topic we will devote our material to — an article for those who lost money in the binary market, but strives for a spectacular return to trading and high financial goals.

lost money on binary options

So, at the dawn of online trading, when the vast majority of private investors had little understanding of the intricacies and processes of the financial market, and purely scientific articles were used as the main informative resource for studying the work of traders, the concept of money management included a rather wide range of issues. Literal translation in this case means “Money management” and specialists include such moments – a variety of financial and economic laws, statistics, the principles of trading on stock exchanges, certain financial and technical limitations when working with trading instruments. But in private investment activity, and especially in binary trading, this concept was significantly narrowed by market participants to the management of risks and trading capital in the trading process.

What is the right money management?

The bulk of traders in the binary market, especially beginners, are quite light-minded and somewhat negative about the rules of management, since they quite severely restrict the level of profitability of trade. But at the same time, the right money management, almost the only way to minimize losses as much as possible, and get a stable result from binary options trading over a long period of time.

To the basic principle of correct management in binary trade, many specialists consider the calculation of the optimal ratio of the value of the trade contract to the amount of the trader’s operating capital. If one speaks in plain language, then the market participant, in order to minimize losses and trading in a deposit-safe mode, must execute transactions, the volume of which will correspond optimally to the amount of trade capital. For example, if there is an amount of $ 100 on the investor’s deposit, then in no case can you put all the funds for 1 contract. In another version, one trading bet on the market with a loss-making result will result in the loss of all investment funds. The overestimated value of contracts is the main mistake of beginning traders and self-confident professionals, which inevitably leads to critical losses of capital.

Professionals for a long time calculated the most optimal indicators of the right manimage for trading with urgent rates. Classical rules have such generally recognized indicators:

When using highly efficient trading systems, the level of trade risks can be set at 5% of the amount of capital
Working in the mode of high-frequency trade (scalping), the risks must be limited to a level of 3% of the volume of operating funds
When drawing up a series of trading rates, their total value can not exceed the level of 10% of operating funds
These risk-restriction indicators open up the possibility of obtaining minimum capital losses and allow a quick recovery of the overall trading result.

A separate approach to money management can be considered an approach in which packages of trading positions are used – risk diversification. The principle of risk diversification can be illustrated by simple folk wisdom – “Do not put all the eggs in one basket.” Applicable to binary trading, this means that it is better to draw a dozen trading positions in small amounts and on different underlying assets and get a general profitable result than to make a big bet on the quotes of one asset.

The right money management allows traders to get the most stable result with minimal losses. Market participants who are disciplined in the issue of capital management, reach the highest trading heights.

Financial conditions of trading as a factor of effective risk management

It is worth noting that the correct management and stable trade on the market directly depends on the broker’s trading conditions, the main indicator in which is the ratio between the amount of initial trading capital and the minimum value of the contract. What is meant? The fact is that brokers, setting the terms of trade on their site, often offer indicators that can not contribute to the right management. For example, a minimum deposit of 75 USD and a contract value of $ 50, that is, one trading position on the minimum trading account is more than 50% of the total amount of trading funds. Under such conditions, immediately after receiving a loss-making contract, the trader needs to re-enroll funds to continue trading. The optimal ratio is considered by specialists when the sum of the minimum trade position is 10% of the initial capital amount.

The minimum trading capital for most companies is 10 USD, and the contract value is 1 dollar. Thus, the market participant has the opportunity to issue a series of 10 trades on a minimum account. Given the use of a workable strategy and payment contracts at the level of 85%, such a volume of capital with the right money management will bring up to 8 dollars from one series of trades, which will allow the trader to receive large amounts of stable profit in the future.

Manipulation Psychology

An additional factor in influencing the efficiency of the trader in terms of managing capital and risk is psychology. Here it is worth noting that the main problem in this case is the greed of the trading participant. Of course, everyone remembers how they started to trade – they wanted to earn as much as possible and faster. As a result, many of you opened bids at once, as they say for the whole “cutlet”, and lost operating capital on just one or two transactions. Therefore, psychological moments in management are of extremely high importance. You as a potentially successful investor should first of all curb their emotions, greed and ambition. An effective and successful trader is an investor who can correctly calculate all the necessary indicators of trade contracts, and strives for stable results, not short-term success. It is from the stability of capital growth that your final result of activity in the market will depend, and not on the instant increase in capital. For this reason, your greed and psychological instability here act as a major negative factor affecting the effectiveness of risk management and the financial indicator of trading.

Conclusion

In the end, correct management is the main tool and rule of stable trading in a binary market, ignoring which leads to a complete loss of operating funds and the termination of trading. On the other hand, managing risks and trading capital, you can earn a lot and consistently!

TRY BINARY OPTIONS TRADING

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

Article for those, who lost money on trading binary options. Learning money management!
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