There are tons of educational material that talks about trading binary options. Doing a search on Google or whatever search engine you mainly use, a proliferation of guides and tips will easily envelop your screen. But are they really worth your time? Below are 7 essential tips that every binary options trader should know. Each tip points out a skill or resource that, when combined with others, can generate a realistic return on investment.
Traditional financial markets like stocks and spot currencies have no predetermined limits in terms of risk and reward. In other words, you do not know how much you can profit or lose from any given trade. On the other hand, a binary options trade offers the ability to mitigate risk by presetting both potential gain and risk amount. Although potential gain is capped, your capital is protected from further losses in the event that you are unable to manually close it for whatever reason.
You will need a specialist like UltraTrade to process binary option trade orders for you in any of the financial markets you choose to trade. As a trading platform, UltraTrade has the infrastructure to manage trades in multiple underlying assets including stocks, currencies, indices, and commodities. Working with the right broker plays a vital role in your success as a retail trader in the binary options market. Order execution must be timely and reliable, rates must be fair and competitive, and customer support must be available 24/7 to address inquiries and technical issues.
For traders who are completely new to the binary options market, the learning curve will usually be a stretch. Nonetheless, it is a path every serious trader should commit to. You can practice either on a demo account or a live account that contains a small amount of money you are comfortable risking. Most brokers allow traders to open a minimum account with no more than $50. Only after you have developed the techniques and the mental framework to trade professionally should you consider opening a live account with a larger amount of money.
Perhaps the single most important aspect in trading is risk management. No successful trader has been able to profit consistently without a set of risk management principles they’ve acquired over their long career. One way to mitigate risk is by controlling the size of your positions. For example, if you are trading binary options by way of Forex, adjusting your position from 1 standard lot to 1 mini lot during volatile times of the day or week is a great way to protect capital.
This addresses the common misconception of new traders that the more they trade, the higher their ROI over time. On the contrary, frequent trading actually leads to more chances of losing. Overtrading exposes your capital to unpredictable short-term fluctuations. Instead, look for your sweet spot when it comes to time frame of your trade positions. Trading long-term preserves capital from trade losses and broker commission fees. It also causes less stress and frustration apparent in day-trading and scalping strategies.
Risk is ever-present in the trading business. Irrespective of the underlying asset, time frame, position size, and the educational resources and technical tools you’ve used to acquire trade ideas and entry signals, risk will always be there to surprise you. Accept this fact and you’ll be better inclined to managing losing positions. If you try to avoid risk, you will always feel that your trade ideas are 100 percent winners and that you will never lose the trades you decide to take.
What You Do After Trading Matters
Regularly withdrawing money from your trading account is vital to growing it. After all, what’s the use of making money if you end up losing it in some other trade later on. You can schedule periodic withdrawals on a weekly or biweekly basis to emulate the payout of an actual job or business. How much you withdraw entirely depends on your investment goals. At least one-third of your profits should be withdrawn and saved on a separate bank account where it will accrue interest.
These 7 tips are not designed to make you a millionaire overnight or even after months of practicing them. Instead, they are designed to help novice and intermediate traders achieve a methodical approach to making money in binary options. What’s great is that the techniques and tips you acquire from this guide can also be transferred to other financial markets that you decide to pursue later on. Use them as a template to quickly cover the basics and build a foundation around your trading business.