So by now you’ve no doubt heard all about binary options and how easy it is to trade. The advantages associated with this trading method are easy to find. Whether its blog posts or on YouTube, everywhere you seem to look, people seem to be making huge profits from trading with Binary Options.
However before you being there are a few things you need to know. Don’t just jump into the market or you are in danger of getting burnt.
Trading is a serious task and one that you need to be well informed about if you are going to succeed. Check out my top tips to help ensure that you become a top binary options trader in 2015.
1) Choose The Right Broker
It really is true. You do need the best tools to get the most out of trading. This starts with the broker that you chose to conduct your trading through. You need to find a reliable and dependable broker for trading binary options. After all you are going to be entrusting them with your money and to execute your trading instructions accurately.
Unfortunately the binary options industry has been tainted by many underhand practices. This includes shady brokers who have tried to pass themselves off as legitimate but have been more interested in taking traders money than helping them to make it.
When you choose a broker make sure you go for one that is reputable, regulated and well established. There are a good range of brokers that offer legitimate services and top quality platforms that you can trade with. Do your research and find a top quality broker that you can use as a solid foundation for your trading.
2) Pick Your Market
Most traders fail. This is an unfortunate fact. However the reason for their failure is not for a lack of trying. Many traders fail to devote their time and effort to those areas of trading that have the greatest effect on their results. One of these is picking a suitable market to trade and learning it inside out.
Most brokers these days offer a wide range of different assets. These include both popular and exotic markets which can prove a temptation for novice investors to trade. The thought of all these markets often leads a new trader to think they should be trading around the clock to maximize their profits. This soon proves to be their undoing.
When you trade, you only need to monitor a handful of markets. Stick with those that are commonly traded. This will make it easier to find information and analysis that you can use as the basis of your trading. I normally recommend that new traders focus initially on the global Indices. These markets don’t move as quickly as commodities such as gold or oil.
Currency pairs can also prove too volatile for beginners. Once you have a basic understanding of how prices move and a strategy, you can then expand the range of markets that you monitor and trade.
3) Be Aware Of The Odds
Most binary options contracts are taken with the odds in favour of the broker from the outset. Yes that’s right. You might have the opportunity to make 70, 80 or even 90% return at expiry, but if you stand to lose your entire stake then it is important to realise that the odds are stacked against you. This is how most binary options operate.
Of course while we would prefer more even odds, I doubt many brokers would be keen to offer these too us! It is therefore important that we know what we have to achieve from our trading to push the odds back in our favour.
For any strategy it is easy to work out what you need to achieve as your ‘win rate,’ Simply take your average return and divided this into 1. So for a broker that is paying out 75% on ‘in the money contracts the calculation is as follows :
- 1 / (.75+1) = 57% This means that you need a 57% win rate in order to move your account forward.
Trading at this level is possible; but you need to have an edge. With the odds against you it is important that you are confident enough to be able to deliver a long term ‘edge’ to your trading. This is where back-testing and walking through trading opportunities in ‘forward’ testing is vital. You need to build up your confidence in your systems and their ability to deliver when your money is on the line. You can read more about the win loss ratio for binary options here.
Don’t expect every trade to win. This is not realistic. There is however a fine between hitting a few losses and your strike rate plummeting due to a strategy that simply does not work.
4) Money management
If you truly want to make 2015 your year and make money from binary options trading then it may be a good time to review your money management. The difference between amateur and professional traders comes down to how they manage their risk. Basically this means how they discipline themselves and manage their money when it comes to their trading.
We all know that putting all your money on one outcome has only two results: you either win big or you lose the lot. This is gambling and the difference between a pro and rookie.
Trading is a game of probabilities. As we have already seen you need to have an edge. Part of this edge comes down to managing your risk by implementing effective money management from the outside. If you don’t get this right then you won’t last long in the game.
Ultimately Binary Options is not easy, no matter what the ‘guru’s’ would like you to believe. You have to be disciplined and stack up the odds in your favour to give yourself the best chance of success. Getting the right broker, market to trade and finding your edge against the odds will start to redress this balance. Learn how to manage your money and you will get you over the final hurdle and on the path to profitability.