How To Consistently Make Money With Binary Options Trading
Are you familiar with the game of baseball? It’s a popular sport in America, Japan, Cuba, South Korea, and a few other countries.
The basic idea is that a pitcher throws a ball at a batter, whose goal is to hit the ball. If he does so without the defensive team catching the ball, the batter will advance to a base.
In baseball, one of the best things a better can do is a home run. This occurs when the batter hits the ball over the fence on the perimeter of the field. When this happens, the batter automatically scores a run.
But in order to hit a home run, the batter must swing very hard. This often leads to the batter missing the ball completely and instead getting what is called a strikeout.
The harder batter tries to hit a home run (also known as “swinging for the fences”), the greater the risk of the batter striking out. Therefore, many batters try to simply hit the ball and move to first base instead.
So, what the heck does this have to do with trading binary options?
Simple. Continually attempting to make huge profits on every trade, rather than settling for consistent, smaller profits, is the same as swinging for the fences.
Don’t do it.
You Only Need To Get On Base
With a maximum payout of 90% for winning trades, which the best binary options brokers such as Finpari provide, you only need to be right approximately 50% of the time in order to be a profitable trader.
This means you don’t need to swing for the fences. Rather, you only need to get on base majority of the time.
This means it is crucial to maintain the same exact risk on every trade.
Since it is impossible to know ahead of time which of your trades trades will be winners and which will be losers, don’t risk a greater amount on one trade than another.
Let’s say you make three trades and to them end up being winners. If your capital risk on each trade is the same, you will have made money on the some of those three trades, regardless of which one of those three trades was the losing one.
However, what happens if your losing trade was taken with $1,000 risk, but you only risked $300 in your two winning trades?
The answer is that you would still end up losing money on the sum of those three trades, even though two of the three trades were winners.
Therefore, keep your risk consistent, which will allow you to get on base majority of the time.
In my first blog post, I said you need to have a binary option trading plan that clearly defines the amount of risk you take per trade. Now you understand why.
Should You Practice Trading Binary Options?
By the way, I almost forgot to warn you about paper trading, which is making practice (imaginary) trades without real money.
A lot of beginning binary options traders think this is a great thing to do because it allows you to “test the water” without risking any real money.
However, I’m here to tell you that paper trading is useless and creates false expectations.
Why? Because those human emotions that I talked about in my last blog post (greed, fear, and regret) cause you to make decisions much differently when your own real money is on the line.
So, rather than paper trading, my advice is to immediately start by trading real money, but just keep your capital risk per trade small until your profits start to grow.
Be sure to tune in for my next blog post, in which I will share with you one of the most common mistakes that beginning binary options traders make, as well as a very easy way to avoid falling into the same trap.
I can’t wait to tell you about it!