Binary Options System

Binary Options SystemIt doesn’t matter what you trade or how much money you have to invest, if you’re going to be a successful trader you’re going to need a system.

Systems do a number of things like giving you entry and exit points along with stop losses and projected profits. Trading is stressful and making decisions on the fly is sure to end in disaster.

Binary options are a little different to normal trading but that doesn’t mean you should trade without a valid system in place. In this article we’re going to explain how to develop a profitable binary options system that enables you to stay solvent even when the markets are completely irrational.

First of all before you even begin to trade you need to implement a money management strategy. In normal trading using leverage it would be unwise to risk more than 2% of your equity on a single trade. Sure if you have a number of strong signals it might be worth increasing that to 5% but certainly no more than that.

With binary options you are risking up to 95% of your capital on one trade, doing that over the short term is going to bankrupt you very quickly, so proper money management is important here as well.

If we apply the same rules as a conventional trading strategy you shouldn’t risk more than 2% of your available equity on a single trade. This means if you have equity of $1000 the maximum you should risk per trade is $20.

Most beginners will think this is a little conservative but look at it this way; you can afford to lose 50 trades in row before you lose your deposit and if you lose 50 trades in a row you don’t have valid strategy.

If you increased it to say $50 you could still afford to lose 20 trades in a row which still isn’t going to be a very successful strategy. But what if you lost 7 trades in a row; you would have lost $350 which is a significant drawdown and a much more likely scenario, even with a successful strategy.

Having lost that much money you would start trading conservatively, trades that you would ordinarily have made would be missed along with their corresponding profits. Those missed trades and profits would make you even more stressed and you’d compensate by making reckless trades resulting in more losses.

You would be trading using your emotions the very thing a strategy is meant to avoid, all because you risked more per trade than you should have. And why did you risk more per trade, because you were greedy and that greed caused fear which combined destroyed your trading methodology.

So do yourself a favor and limit your trades to 2% of your available equity. If you only have $500 then you shouldn’t risk more than $10 per trade. It might not be sexy but you’ll thank me in the long run.

If you do go on a losing streak, and you will at some point, no strategy is perfect. Adjust your trades accordingly, if for instance you lose 20% of your equity ($100) then adjust your trades to a maximum of $8 (5% of $400).

When you get into this mindset you won’t really care if a trade has been successful or not, because accepting losses is all a part of trading and you have proper money management in place to stop you from blowing you float.

Now you’re trading without emotion and your brain is in control not your heart. You’re now ready to move on to the next part of any successful binary options system, technical analysis. In the next post we’ll look at a few of the best binary options signals for you to look for and then we’ll put it all together into one profitable binary options strategy.

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