Basic Money Management Strategy

This may be as obvious to some as balancing your checking account at the end of each month, but bear with us, this is important.

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Before you start

Before you start on the path of binary options trading, be sure to have a strong money management strategy. This will require discipline, but in the end will ensure, at worst, that your losses are more easily absorbed and, at best, that your profits steadily increase.

Where to start?

The easiest place to start is by selecting a specific amount of money you are willing to bet that month, and then selecting a percentage amount which you will use to make all trades at any given point. This can be 5% when you start and 20% or 30% when you’ve become a more successful trader, but we generally recommend a general rule of thumb of 10%.

So say you’ve decided that you have $500 to spend that month. At any one time, for any one trade, you can only place financial bets which are equal to 10% of the sum total of that pot, whether it increases or decreases. So your first trade might be one asset at $50 or two assets of $25. If you end in the money, and increase your pot to $550, your next trade will increase to $55. If your trade ended out of the money, and your pot is now at $450, your next trade would decrease to $45.

You get the idea.

The point of this may seem obvious to some, but we are going to state it anyway. It maximizes the length of your trading time, by minimizing your losses but maximizing your profit potential on your wins.

Some traders increase or decrease the percentage depending on whether their pot is looking healthy or neglected. If you start at 10%, but are on a winning streak, you might up the percentage to 15% or 20%. Vice versa, if your trades are not going your way, that 10% might start looking like 8% or 5% as you get closer to the end of your limit that month.

Once you’ve set your monthly expenses and percentage amount, make sure you read our advanced money management strategies to ensure you maximize your monthly pot.

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