Trading is risky. Let’s get that fact out of the way upfront so we can talk about it and then move on. You shouldn’t trade with money that you will need soon, even if you are trading short term. For one, you don’t have immediate access to your trading account, and two, putting this kind of pressure on your cash will only lead to you making bad decisions. So, before you ever even open a trading account, know that this is money that you should be able to easily afford to lose, and if you do lose it, it’s not something that you should be upset about.
Okay, moving on.
There’s risk in every single kind of trade and every single type of investment you can think of. Binary options have the unique vantage of stating their risk—all of it—out in the open before you ever execute a trade. If you risk $100, you know that if you are incorrect in your prediction that you are going to lose all of that money. If you are correct, you know that you are going to earn the previously agreed upon rate of return. Rates typically stand between 70 and 80 percent, but depending on the type of asset you are trading and the timeframe, this can vary. For example, if you are trading the EUR/USD pair for 15 minute expiries, you will probably earn 78 percent for a correct trade. If you are trading the same asset for 60 second, your return is likely to be closer to 70 percent. Either way, you know what the risk is at a precise level well before you ever decide to execute the trade.
Now that you know what the risk is, you can account for it. If you are earning 80 percent on correct trades, and losing 100 percent on wrong ones, then simple math tells you that you need to be right more often than not. If you are right 50 percent of the time, as random chance would have you at, you’re going to lose money because $100 in losses is not made up by $80 in earnings. At a rate like this, you would need to be correct at least 56 percent of the time to make a long term profit. If you want to make trading worth your time and energy, then you should aim for a number higher than this.
The math is pretty easy, so don’t let this deter you here. Take 100 trades at $100 each with the given rate of return. If you are right 56 times, then you have made $80 ($100 with 80 percent return) times 56 for a total of $4,480. Now, take the 44 trades that you’re wrong on, multiply it by $100, and you have a loss of $4,400. That’s a grand total of $80 in profit over 100 trades. That’s not a huge number, but at least you know where you stand and what you need to do if you want to be successful.
What’s the point of all this? The thing you should takeaway here is that of all the places that you can put your money, whether it be trading, long term or retirement investing, real estate, art, whatever, the point is that of all these things, binary options trading is the only one where risks and rewards can be known in an exact manner before you risk a single dollar. If the risk is too much for you, you have the choice to simply not execute the trade. It is accessible to almost everyone who would want to use this method of growing your money, and it is far more precise than anywhere else you might want to put your cash, too.