Everyone who trades binary options should have some type of money management plan in place. These plans can vary greatly, and often are based upon the personal preferences and financial position of the individual trader. Ask any expert trader about money management and you’re likely to hear the same thing – make a plan and stick to it at all times. While this is sound advice, at some point you’re going to encounter opportunities which are going to tempt you to deviate from your basic plan. The question that most have is, should I?
There is no such thing as a guaranteed trade outcome. The best that a binary options trader can do is forecast upcoming price movement to the best of their ability. What we do know is that strong indicators can tell you that your trade is likely to finish in the money. This would be a good time for an increase in your investment amount, but the increase should be reasonable. For example, a $100 investment could be raised to $150, not $500. The decision to go higher doesn’t mean that you have to go a lot higher. Erring on the side of caution is always the smarter choice.
The use of binary options signals can also present times in which money management plan deviation is considered. The most reasonable plan here is to actually use signals for a period of time in order to ensure that your provider is reliable. A reliable signals provider isn’t judged solely on the methods and timing of signal delivery, but primarily on how accurate the signals actually are when used in investments. Daily accuracy percentages are going to vary, and therefore may not be the best indicator. Consider instead the monthly average when determining reliability.
Should you follow a percentage based money management plan, you may be considering raising this percentage. This would obviously increase the investment amount on all trades. In order to determine whether or not to make this move, consider your position as a trader. This means doing the math and figuring out your success percentage. If 51% or more of your binary options trades are finishing in the money, an increase can be considered. If not, the best advice is to work on becoming a better trader before committing a larger amount of your trading funds to each contract.
If you’ve considered deviating from your money management plan, yet aren’t sure of the best way to do it, consider compounding. This is a binary options strategy in which you’ll adjust your investment amounts both up and down to account for both successes and failures. When compounding, you’ll invest larger amounts when your account funds increase and lesser amounts when the total decreases. Whenever you’re trading well, the growing investment amounts are going to provide steady profit growth, while also rendering any losses easily sustainable. Simply put, compounding takes the decision making process out of your hands and handles the matter for you.
No one is going to be able to tell you how to handle your money. There absolutely will be times in which you’re tempted to invest higher amounts on certain binary options trades. There may also be times when you feel it wise to invest less. In the end, you’ll need to decide on an investment plan which is works for you. Consider your finances and your comfort level with risk at all times and then important decisions should be easy to make.