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SignalKING 588.78% $47,635.66 17378 47.6% 316 270 Invest
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SignalMAX 523.59% $76,046.14 12184 69.74% 169 209 Invest

Money Management: Keystones of Successful Binary Options Trading

Money Management: Keystones of Successful Binary Options Trading
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Contents:

1.Fundamentals of Money Management or Secrets of a Legendary Trader
2.Formation of Principles of Deposit Management
3.Empire Collapse or Dangers of Money Management Ignorance
4.5 Pillars of Modern Money-Management
5.Talking Simply about Difficult Stuff: Deposit Management in Binary Options Trading
6.Money-Management in Practice: Step-By-Step Safe Trading

A dated proverb of Spanish seafarers says an experienced pilot can handle the vessel without any route. But they will for sure reach the bottom only this way. Money management are the basic rules of maneuvering in the stormy sea of option trading. Mastering this “map” of reefs and shoals, even a beginner trader will steadily come out in the open and calm sea of stable income at the market.

Fundamentals of Money Management or Secrets of a Legendary Trader

The founder of the term “money management is legendary Jesse Lauriston Livermore (1877-1940). He was first who formulated the main principles of managing the capital. Even sharks of Forex name him with excitement: this man has shown in practice for several times how can an office clerk rise from tiny savings to the very top of financial prosperity. He has earned a million dollars for a day and more than 100 million dollars for a year. Livermore was called the most significant trader ever. His “ghost” follows US financiers till nowadays. He is the obvious proof that a man without atomic bombs and high governmental duties can demolish currency markets in several hours and cause the strong crisis of the “selected” country.

Formation of Principles of Deposit Management

There is nothing fantastic or extraordinary in talents of “Boy Plunger” and “Wonder Boy” who started gaining solid money. The ability to transform a dime into 3 dollars can’t be called even luck. The boy was dreaming of wealth, writing down quotations while on duty. Realizing he doesn’t have funds for the second attempt, he was developing and processing a simple and safe algorithm. Livermore has formed his knowledge when grew adult in a small but priceless set of rules for traders. Actually, by this time press has changed its attitude to this founder of technical analysis.

He was buying limousines and yachts just like socks, while Wall Street was flushed by the wave of bankruptcies and suicides. “Financial Devil” and “Minute Millionaire” was seriously accused by journalists in demolishing financial system and the beginning of the Great Depression in US. But these very words of the brilliant trader’s biography can let us confidently state: the structured money-management and cool head is not only the opportunity to remain afloat, but also to get solid incomes with any character of the chart. The detailed and worked technique of deposit management doesn’t give a chance to panic and lose funds because of emotions.

This thing is quite common for unprepared traders. So, I strongly recommend to be trained before diving into the market. And this training should be started with the article “TOP-5 Tips to Make Money with Binary Options – The Step-By-Step Instruction for Trading”.

Jesse Livermore

Empire Collapse or Dangers of Money Management Ignorance

A novice can be probably wondered: what will happen if they ignore orthodox principles of money-management and look for other ways. Livermore has answered this question himself given the last lesson to his successors. “Unsinkable Jesse” has fallen for liquors by his old age and began to conflict with his own rules. He has broken laws which have become the Bible of traders and has wasted the whole fortune. The end of a legend’s biography was the shot in the temple.

5 Pillars of Modern Money-Management

A novice drowned in tons of literature and recommendations about deposit management can think this business is too complicated for them. Just not to be like authors of boring morals, I will try to pick out 5 main rules of proper money-management. They must run through like a red thread of the work. The technique fits for aggressive and for conservative trading strategy.

So, pillars of reasonable trading are:

  1. Realization of common comfort zone in money equivalent.
  2. Defining the sum of single risk.
  3. The limitation of maximum of simultaneous orders.
  4. Planning incomes at a concrete purchase.
  5. Statistics, accounting, control, analysis and conclusions.

Before dissecting each point, I must pay precise attention at the word “risk”. It can be regularly met in principles of money-management. The continuous talking about risks is not the attempt to scare a novice searching for their way or make them betray the selected strategy. This is the simple ascertaining of the situation: any order can be either profitable or failed – it’s inevitable. The try to forget about risk is the straight way to bankruptcy, but if you always think about it, then you are likely to go nowhere. Risk must be realized, perceived and fixed. And then, you should never break its limits. In our very case, risk is the antonym of profit.

Unfortunately, unsuccessful traders often forget about it and then accuse everybody and everything in their own failure. That’s why, to get rid of waste-words, I recommend you to study the article “Who gains stating binary options scam? Professional Opinion of Financiers!

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Talking Simply about Difficult Stuff: Deposit Management in Binary Options Trading

And now, let’s talk about numbers and step-by-step instructions:

  1. The deposit you have in disposal is the main value all the calculations are based on. Binary options let you start with humble reserves, reaching significant incomes for hours. But this number affects the size of each order, and general limits of incomes and risks. A trader having a deposit of $100-200 can’t chase the single profit of an exchange shark with $50,000 in stash.
  1. Limits of the volume of a concrete order must be defined before. The selection of the strategy is up to a trader, but we are oriented on those who have proven the reliability of their calculations with practice. One single order mustn’t exceed 3-5% of the deposit volume. 5%-order is considered as aggressive trading. An ambitious novice dreaming of a momentary and enormous profit from an all-in-order, I recommend recall the fate of an old man Livermore. He also wanted to get a big pot at once and was sure (distracted by his euphoria) that the strategy can’t let him down.
  1. The number of simultaneous orders depends on the selected strategy. I advise you to orient on the value which is reliable and tested by most experienced traders – 15% of the overall deposit amount. With the careful tactics with the order of 3% their single maximum is 5. With aggressive and 5%-orders their single maximum is 3. I advise novices to stick to humble 2% and stick to the maximum of 3 orders at a go. This way, the absence of a tested trading strategy will be compensated by the minimal risk. You should follow the algorithm perfectly: the limitation will let you resist and never bet all the amount you have. Such deed can lead to bankruptcy, and the trader’s career will finish before starting.
  1. The defining of the top of profits also plays the role of a restrictor. In case of binary options, this value is fixed: 70-90% for a correctly forecasted vector. One doesn’t have to calculate it.
  1. Analysis and control is the obligation of a successful trader. Yes, practice of trading with binary options looking quite simpler than a typical working at stock exchange know many cases of occasional ups. But the secret of stability hides in analysis: a successful trader keeps a diary where they note their actions and results, correcting gotten information and forming own strategies.

Money-Management in Practice: Step-By-Step Safe Trading

Let’s start from the basics, writing down our own current situation:

  • We have $200 in disposal;
  • We have selected the active strategy with the amount of single order equal to $5 (the instance of such a strategy is the “Bullet”);
  • Maximal sum mustn’t exceed 15% of the deposit, i.e. $30;
  • The maximum of 3 concurrent orders is defined.Trading securities

Let’s determine the plan of actions and solemnly swear to stick to it:

  1. Orient on the trend and enter the game only if it’s obvious. Suspicious orders and slow dynamics mustn’t interest us: the short terms of operations make the “calm” the most dangerous ever. Having chosen the moment, buy the option for a humble sum of $5. The ability to wait for a right moment gives us from 80% profits.
  1. A losing order is counted in the percent of planned risk and bust be perceived as given.

The mistake often makes a novice panic and pushes to do unreasonable actions. But money-management includes this situation. Rules of managing the capital lets us bet another $25 maximum at the same period of time. This gives the opportunity to turn this situation in our behalf.

Averaging principle works for a trader facing a situation of a wrong forecast. There is a $5 put option bought. All the signs forecasted the fall but the chart steadily runs up. It’s incredible but even such a situation can lead to earning. Waited for a serious rise, make a double purchase in the direction same to the first one, i.e. for a fall. A correction drawback is inevitable: a slight fall of price will take place. It’s usually not enough to cover losses of the first order but profits of the second one will compensate the loss add give income of 35-55%.

  1. A successful order is the reason to continue working and, starting from the first point, repeat the success.
  1. A failure is the cause to think and analyze the market situation again. Maybe, you should wait with conquering it for a while – maybe for a day. My experience says for 3 wrong bets one’d better break the trend with a distracted rest.

Principles of trading with binary options are quite simple. Unfortunately, this first-sight simplicity and high profitability cause euphoria among beginners. The need for the momentary income, try to get a big bank – are the most common reasons of bankruptcies. Only money-management, the strategy and reliable broker selected together guarantee profits. Though, these tips are followed by just 10% of those who enter the market. All the rest, amateurs don’t have anything but tell about their attempts to work with binary options and how they got worn out by this fierce sea.

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Technical Summary

Timeframe 2018-01-22 13:55:35 GMT
EUR/USD
1.2248 +0.0025 (+0.20%)
Summary Strong Buy
Moving Averages: Buy (9) Sell (3)
Indicators: Buy (9) Sell (1)
EUR/USD 1.2248 Strong Buy
EUR/RUB 69.2988 Strong Sell
USD/RUB 56.5790 Sell
GBP/USD 1.3922 Strong Buy
USD/JPY 110.77 Strong Sell
EUR/JPY 135.67 Strong Buy
AUD/USD 0.8016 Strong Buy
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