Beginner traders usually ignore or don't realize the importance of money management in their trading. They tend to focus more on the strategy or system. They confusingly perceive that to be successful in trading, they just need a reliable trading system. This is completely a wrong belief that can lead them to endlessly search for new trading systems as they lose money in this search. A successful trader understands that to make money in trading in the long term, strategy is just a part of the success factors. Successful trading is a combination of reliable strategy, trust in the strategy, money management, risk management, discipline, and consistency. In this post, I will show you three important money management techniques you may be interested in for your successful trading.
1. Fixed Betting
This is the most simple money management technique. In this technique, you will use a fixed amount of bet for each binary options trade. The fixed bet is a proportion of your total balance; you will keep using this fixed bet until certain points where you think it is appropriate to increase the bet. For fixed bet, it is recommended to never exceed 5% per trade of your balance. If you have large capital, you consider lowering the bet to 2 or 3%, depending on your profit goal. For example, with 1000 USD balance, if you take 5% per trade, each bet will be 50 USD. You keep taking this amount for trade until you double your balance before you consider doubling your bet, for instance.2. Compound Betting
Compound betting is also a popular betting method for binary options. Compound betting will increase your balance faster than the method of fixed betting as long as your trading strategy is sound and reliable in the long run. Compound betting is when you keep increasing or decreasing your bet after each trade. Compound betting is for those who take one trade at a time. For example, with 1000 USD balance, you may take 5% trade (=50 USD). After the trade ends, you have to recalculate your bet as 5% of your current balance. If your 50 USD trade ends in a win of 80% gain, now your balance will increase to 1000 + 40 = 1040 USD. Your next trade will be 5% of your current balance; 5% x 1040 = 52 USD. If your 50 USD trade loses, your next trade will be 5% of your current balance; 5% x 950 = 47.5 USD. However, using this technique, you need to have a consistent winning strategy to boost your balance because it increase both our wins and also our losses.3. Super Compound Betting
Super compound betting is a brilliant method to trade binary options and it is my favorite strategy. The name of this method is coined by me for this post. This technique can really boost your winning for your account; however, it also has a big drawback as well. Super compound betting is the method in which you take profit from your first trade and add it to the original bet to be placed in the second trade, and you do this again for the third trade. You can also keep doing this for 4th or 5th trades but I recommend not to do this up to the 4th trade. It is too risky. The big advantage of this money management is that sometimes you don't need to have more winning trades than losing ones but you can still make exponential profit from this method. My personal suggestion for using this technique is to limit your losses for each day of trading and quit trading for the day. Continue tomorrow. Never over trade. For me, if I win three trades in a row, I will stop trading for the day. If you trade synthetic indices on Deriv.com, three wins in a row can make you up to 33% account profits. I keep doing this three times until I meet the three wins in a row. If I lose 15% of balance, I will quit trading as well. Doing this consistently with a reliable trading strategy will surely make big profit in a long term. However, using this strategy may cause you to meet a few days of losing in a row as well. With confidence and trust, you will still make big return with your patience. Trading is highly risky and unpredictable. Using this money management technique, you have to bear in mind that if you keep losing 15% for 6 or 7 days in a row, you will lose everything. With a solid strategy, I am sure that your return is much higher and account grows faster with this technique.Conclusion
Money management has very important role in your success. It helps protect your account as well as boost your profits. You can choose anyone of these 3 techniques that fit your style of trading. However, the principle remains that higher return is associated with higher risk, no matter what techniques you use. You need to play by rules in the world of unpredictability; that is the only way to win.
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