Money management in binary options

No matter what market or instrument do you trade, you should always follow some basic rules and manage your money. The first and most important rule is that you should never risk money that you cannot afford to lose.

Then you should risk your money within your account in a moderate way. It means that you should never risk too much in a single trade. Traditionally traders tend to risk 2 % of their accounts per trade. Some go up to 5 %. In binary options the same rules apply.

So if you start with a small account of $100, you should risk $5 per trade maximum. As you can see, your initial deposit will also influence your choice of your binary options broker. Because if a broker allows minimum trades of $25, you should not go with him with a deposit lower than $500. Otherwise you would be risking too much on each trade.

The reason why you have to limit your risk to a low percentage is that no trading system is giving only profits. Each trader has losses and you will experience the same with binary options. The key is to gain more than you lose. That is the basic principle of trading.

And losses can come in a row, that is why you cannot risk a large part of your account on each trade. You have to protect yourself to survive losses.

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