Binary Options Money Management 5 years ago

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The binary options market is a financial market, which means that the only business an individual has with this market is to make money from it. However, making money is not a random event and traders should realise that there is a structure to the entire process. It is therefore a very welcome idea for traders to understand how to develop a bankroll strategy for the binary options market.

One way of developing an organised bankroll strategy is to first define what the money-making goals are.

a) Would you want to see your money coming in at regular intervals: weekly, monthly, etc)?

b) Are you in the market for the long haul and would not mind trading your capital and compounded profits for at least a year or two so you can get a lump figure that could start you off on something big down the road?

c) Would you like to do both?

It is important to understand which of these three points would be your goal because your approach to the market is determined by the goal(s) you choose. The traders who want money coming in with more regularity would definitely be more aggressive in their trading plan, pursuing more opportunities and setting shorter trade profit targets. Traders who opt for a more long-term approach understand that a little profit compounded over a long period of time will ultimately lead to a huge amount of money, and because there is no pressure to deliver returns, the trading approach is less aggressive and more conservative. In this group of traders may be people who are preparing for larger financial projects in five to ten years, or aiming towards retirement.

Here are bankroll strategies for both sets of traders.

The "I Want it Now" Group

If you really want to make sense of trading for short term profits, then you have to be prepared to muster plenty of capital for it. You want to be able to cash out your winnings regularly, and this requires some market aggression, which will lead to mistakes. Traders who are more short term oriented will definitely make more trading errors than the long term traders who are naturally more conservative. Your increased capital helps you stay in the game longer, weather the storms that will arise from trading mistakes and help you maximize returns from your shorter term targets. You probably would need more knowledge and have more weapons in your trading arsenal because the structure of the market is designed not to favour traders in this class. You need to copy what the heavy market players are doing, so you need access to their techniques, their tools and their mindset. All told, you need to invest a lot for this project. Many have done this successfully, and gone on to use the money made for useful things, but you must be prepared for the bumps along the way.

The "I Want it Later" Group

In this group are traders who are looking not for immediate payouts, but who want to see a little money go a very long way. They understand that they can compound $1,000 at 10% returns every month (i.e. making $100 on every $1,000 or making $133.10 for every $1,464.31) will make his investment worth just under $305,000 in 5 years. Now 5 years may not seem like a short time, but when you realise that it is already 18 years since Roberto Baggio missed that famous spot kick in USA '94 and 20 years since Bill Clinton first stepped into the Oval Office at the White House, then you would realise that 5 years is not such a long time by today's standards. Making $100 out of $1000 in a month where there are 20 trading days (i.e. $5 a day) is not such a big deal and indeed, such a trader does not need to be a Warren Buffett to achieve that. Risk is low because these traders do not take risks, and even when they are compounding tens of thousands of dollars in year 4 of their plan, they are not increasing risk beyond when they were compounding a few thousands.

So you have to ask yourself: what bankroll strategy do I have for the binary options market? Am I in this for the immediate profit I can see or would I be better off trading for the long term? If you are in your 20s or 30s reading this, the answer should be pretty much easy for you. A lot can happen in your life before you are as old as Bill Gates, Micheal Dell or Ingvar Kamprad.