How much money should I invest per trade in binary options
This is one of the questions I am being asked all the time. If binary options are such a sure-win method (well, it isn’t but that’s a different issue) then why should I not invest $500 per trade and make $20,000 per day in profits? After all, the more you invest the more you will earn.
If you just invest $10 per trade then at most you will win around $9 per trade in profits. Would this have been $100 then you would have won $90. So, at the first sight it does seem that you should be investing a lot per trade.
This however does not take into account two things: that you mist likely will deposit the minimum permitted amount and that you will rarely (or never) achieve a winning rate of 100%.
Winning percentages and minimum deposits – a game of numbers
I have explained it in several other articles that you will need to achieve a winning rate of around 65% to 70% in order to consistently make profits in binary options. This is because brokers rarely offer payout rates of 100%.
In case you are being offered a payout rate of 80% it means that for every successful trade of $100 you will win $80. On the other hand, if you lose, you will (usually) lose all the $100.
Therefore, on average you will have to win much more than 50% of the time to be able to break even and to make profits.
What this means is that even if you are a successful trader sometimes you will still make some mistakes. If you successfully predict the future movement of assets at least 80% of the time you will definitely make profits but it also means that approximately 20 out of your 100 trades will be unsuccessful.
Now, nothing can guarantee that those 20 unsuccessful trades won’t be the very first trades you make.
This is where the issue of minimum deposits comes into play.
Minimum deposits and large investments shouldn’t mix
As explained, even if you are a top-ranked super successful trader you will still make inaccurate predictions form now and then. And it can happen that these inaccurate predictions will be your very first.
As such, if you are a minimum deposit trader who deposited something like $200 or $250 when signing up at the broker you risk of losing all your assets within just a few trades if you invest a lot per trade.
If you have deposited $200 and then invest $100 per trade you are just 2 incorrect predictions away from blowing all your account balance. If you deposited $200 and then invested $50 per trade you are just 4 trades away from losing all your money.
And as I explained above, even if you are a super successful and professional trader you will still make mistakes and nothing will guarantee that these mistakes won’t be your first 2-4.
So, as you can see, with a minimum deposit and large investments per trade you are extremely close on losing all your deposit even if you are good at binary options.
Therefore, you should always keep in my the following rules:
– Only invest approximately a 20th of your total account balance per trade.
What this means is that if you have deposited $200, for example, you will only invest maximum $10 per trade.
This means that you are 20 trades away of losing all your money in case ALL your 20 trades will be unsuccessful.
The trick here is that it’s extremely unlikely that you will experience 20 consecutive unsuccessful trades. I’d even go as far as to state that this is impossible even if you just trade by random.
If you however also use proper strategy, then executing 20 trades in a row will definitely result in you making profits.
Even if you first 2-4-6 etc. trades were unsuccessful in row, you will still now blow all your account balance and will have the possibility to eventually recoup all the losses and make some profits as well.
Would you have invested $20 per trade you would have been just 10 unsuccessful trades away of losing all your money. For $50 per trade you would only have been 4 trades away of losing everything.
So, definitely keep this in mind next time you trade binary options. It’s really a simple rule anyone can understand. Just divined your total account balance by 20 and you will know how much you are allowed to invest per trade.
Variations of this rule with larger account balances
The above rule is valid in case you are a minimum deposit trader who has just deposited between $200 and $250 per trade. In case you have much more money in your account I believe you should modify this rule otherwise you will reach very large sums per trade.
I believe this is the best investment size per trade guideline:
Account balance: $200 to $1,000
Investment size: 20th of your balance or 5%, which means between $10 and $50.
Account balance: $1,000 to $2,500
Investment size: 25th of your balance or 4%, which is $40 to $100.
Account balance: $2,500+
Investment size: ~30th of your balance or 3%, which is $75+
You should also cap your investment per trade at $200. So, even if you have an account balance of, say, $20,000, I believe you still should not invest more than $200 per trade.
These are just best practices that I have discovered when trading myself. You should not expect any “scientific” explanation. I just honestly believe based on experience that if you follow these guides you have eliminated your chances of going bankrupt and getting carried away.
The second part is very important in case you have a very large account balance. If you have a large account balance of say $20,00 it’s easy to get carried away and make very large investments per trade believing that nothing can stop you.
This is why I implemented the rule that says you should not trade more than $200 per trade no matter how large your account balance is.
This is the only place you will read about this guide…
If you read other binary options sites and forums then you will inevitably read “guides” and articles that will claim the exact opposite of what is being written here. This is because most binary sites are not interested in you winning but instead side with the brokers who are interested in you losing.
This is why no other site will tell you to invest smaller amounts per trade. Investing smaller amounts per trade will massively improve your winning chances in the long term (because it eliminates – or greatly reduces – your chances of going bankrupt).
Other sites and brokers avoid talking about this because they want you to eventually lose. I on the other hand am interested in traders winning and not losing. This is the reason I’m more than happy to share my trading experiences and guides that can directly help you improve your winning odds.
And that would be all for this article. If you liked this and are interested in learning more about binary options winning strategies then please feel free to stock around and check out my additional articles and guides. Thanks for reading.