Best Binary Options Money Management Strategies

Updated on: 6 January 2020

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An efficient winning strategy in binary options also contains money management. The money management part in binary options is not a strategy that will help you predict the movement of certain assets. It’s a strategy that will help you manage your assets well in order to achieve your desired profitability ratio.

Money management is generally ignored by most binary options traders. This is because they believe that it’s enough to be able to predict the movement of the assets and everything else will follow automatically after this. However, if you don’t have the necessary discipline in order to manage your finances you might actually end up losing money rather than winning.

A good binary options money management strategy basically has two main parts, which are taking some risks as well as having the discipline to abide to the rules that you have proposed in your money management strategy.

There are a lot of binary options money management strategies available. Below in this article we tried to outline most of these strategies. Based on your trading style and goals you may decide yourself which strategy you’d like to use.

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Most Efficient Money Management Strategies

First of all we’d like to reiterate the issue about discipline. Sure, you will be trading with your own money and as such you can do whatever you want, however if you’re really committed towards making money in binary options then you will have to have discipline and follow the proposed strategies to the letter.

Below we tried to compile a list of the best binary options money management strategies. We won’t tell you which strategy to use, however after reading the below descriptions you will be easily able to find the strategy that best fits your needs.

The below strategies focus on establishing various minimum winning or maximum losing requirements and limits. The idea is that once you reach the proposed limits you will have to stop trading no matter how much money you have won or how much money you have lost.

Number of wins & number of losses

This is one of the most common money management strategies in binary options. If you use this strategy, you will have to propose yourself a daily total number of wins or loses limit. Once you reach one of these limits you will immediately stop trading.

For example, you may propose to win a maximum of 10 times per day. Once you have reached this limit you will stop trading. This is because it may happen that you may get caught up in the heat and enthusiasm and may become reckless in the process of purchasing new contracts.

This is a common psychological reaction among financial traders and you should not underestimate it.

Likewise, you should also propose a maximum loss requirement. If, for example, you have lost 10 trades today you decide to stop no matter what. This is because if you just propose a maximum winning requirement you may as well lose 100 trades before you win 10 (usually never happens but we overdramatized it for the sake of the example).

This way if you have lost 10 times during the day, you will stop trading no matter what. This will prevent you from running after your money, something that’s also a common psychological phenomenon observed among financial traders.

Percentage of losses

This is basically the same as the above-mentioned example only in percentages. However, this money management strategy is more permissive because it won’t limit you according to the number of trades won.

Instead, this strategy calls for you to stop immediately in case a certain percentage of your trades are unsuccessful. For example, you may propose a percentage of 20%. If you’re good, you may only reach this percentage after 100 trades or never at all. However, you may as well reach this percentage after 10 trades after which you should stop for the day.

Amount of wins & amount of losses

This strategy is also very similar to the first one with the only difference being that you propose to win a maximum of $X per day and not lose more than $Y per day. If you reach one of these limits, you should stop immediately.

For example, you may propose to win a maximum of $100 per day and not to lose a maximum of $50 per day. Once one of these limits is reached, you should stop trading immediately.

We know it’s hard to stop when you have unfortunately lost but please do not run after your money, it will make things worse since most people are very emotional in these situations. Trading online is about being rational and objective.

Number of trades

This strategy requires you to stop trading after you have executed a certain number of trades regardless of the outcome of those trades. You can also combine this strategy with any of the above.

Winning ratio

And the last binary options money management tip is to watch your winning ratio. If this winning ratio drops below a certain level, such as 80%, you should stop trading. You will have to calculate your winning ratio after each trade you execute. The best thing to do is to use an excel file for this purpose.

Risk Level Strategies

Now you might be asking what the best percentages and ratios are in the case of the above-mentioned strategies. Like, what’s the best minimum winning ratio, for example. This will depend on the risk you are willing to take.

Below we have established the recommended rates and percentages for the above-mentioned strategies taking in consideration the risk level you are willing to take.

Low risk strategy

A low risk binary options money management strategy is for those who do not wish to take high risks. This will result in fewer profits but generally few or no losses at all.

Number of wins & number of losses

– Stop trading after 10 wins

– Stop trading after 4 losses

Percentage of losses

– Stop trading after 8% losses

Amount of wins & amount of losses

– Stop trading after $50 profits

– Stop trading after $25 losses

Winning ratio

– Stop trading if the winning ratio becomes lower than 80%

Number of trades

– Stop after 10 trades

Medium risk strategy

The medium risk money management strategy is for those who would like to earn some extra money but still aren’t 100% sure if they want to go all in.

Number of wins & number of losses

– Stop after 30 wins

– Stop after 10 losses

Percentage of losses

– Stop after losing 15% of your contracts

Amount of wins & amount of losses

– Stop after winning $150 in a session

– Stop after losing $50

Winning ratio

– Stop if your winning ratio becomes less than 75%

Number of trades

– Stop after 50 trades

High risk strategy

The high risk strategy is for those who are not afraid to lose large sums of money with the prospect of making huge profits fast. This risk assessment binary options strategy is only recommended to experts.

In this case, we’ll be allowing for a bit more flexibility and have defined the limits a bit loose (defined by the + sign).

Number of wins & number of losses

– Stop after 100+ wins

– Stop after 30 losses

Percentage of losses

– Stop if you lose 25% of your trades

Amount of wins & amount of losses

– You are already an expert, so you do not need a maximum win amount limit.

– However, stop if you lose more than $100 in a session

Winning ratio

– Stop if your winning ratio drops below 65%.

Number of trades

– You can trade as much as you want, however in this case choose another limit from the ones mentioned above.

General Tips and Guidelines

There are also some general tips and guidelines when it comes to the money management strategies mentioned above. The first is that you may also naturally use different numbers and percentages than the ones listed above (but still in the range of the ones mentioned by us.)

In the beginning and if you are a newcomer you should still strongly consider using the limits written above in the case of the low risk strategy though. Later on you may establish your own limits by slightly modifying the ones mentioned by us.

However, no matter what kinds of limits you use you should ALWAYS have the discipline to stick to those limits no matter what happens. This is one of the most important things to keep in mind.

Another suggestion is that you may combine two or more of the above-mentioned limits. For example, you may propose to not lose more than 10 trades per day and not trade more than a total of 50 trades.

The rule in this case is that you should stop trading whenever one of these conditions is met. For example, if you have lost 10 times but you only traded 20 times you should stop, even though you also proposed to trade a total of 50 trades.

And this is all we have to teach you in this binary options strategy article. Remember, a proper binary options trading money management strategy is essential in becoming a winning trader, so this guide is perhaps one of the most important pieces of advice we can give you.

If you want to learn more about how to win in binary options and binary options strategy then feel free to browse though out additional articles. And like we always say: trading binary options successfully doesn’t depends on luck, it depends on commitment and discipline.

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