When teaming up with a broker such as digital options plataform, traders can put a stop loss strategy to good use. A stop loss is an action that was previously considered to be a part of traditional or Forex trading only, but thanks to the creation of the Sell feature, it now has a place in binary options trading as well. The ability to minimize the negative impact of the inevitable occasional loss is a powerful one to have.
The Sell feature is one which allows you to sell off your purchased binary options contracts back to your broker. In some cases, brokers will only offer to purchase contracts that are positioned either in the money or out of the money. digital options actually allows their traders to sell in either instance, doubling the strategy opportunities. With the stop loss strategy, however, we’ll only consider selling when the position is currently headed towards a loss.
The core of the strategy is simply to sell the open option once you feel that it stands little or no chance of finishing in the money. The offer price is going to be determined by just how far away the position is from being profitable. For example, if the position is not far from being positioned in the money, the offered buy price will be higher than if the positioned were deep out of the money. This means that the decision of when to sell is quite important.
When selling an out of the money position, the offer price is always going to be less than the purchase price, and certainly less than the return amount had the trade finished in the money. This is what makes it a stop loss – you’re taking a total loss of your investment amount and transforming into a smaller loss. Hopefully, a much smaller loss. This simple action will allow you to keep more funds in your account. It will also make losses much easier to absorb and recover from.
No one is going to win 100% of their binary options trades. An excellent success rate is possible, but 100% is not. It is how you choose to deal with losses that makes a difference. A stop loss strategy is an excellent way to make the most of a bad situation. Brokers digital options offers above average purchase offers for many different OTM positions. Your task is simply to take advantage of these “stop loss” type offers.