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  1. #1
    Rookie Member

    Question Risk Management vs Profit !!!

    Hi Guys.
    I have been making some calculation for my risk management and my predictions doesn't seem very bright, let's see:
    If I start with lets say 300$, and I place my risk at 2%, only making investments of 6$ and placing 10 bids per day. Assuming a 60% efficacy and a 80% pay per investment by the broker, I will be making 64,8$ a day. This means it would take me around 2month and a half to make my 300$ back (double the investment).

    this is my calculus:

    300 x 0,02 = 6$ <--the 2% of the initial investment
    6 x 0,8 = 4,8$ <--the 80% pay per investment
    6 + 4,8 = 10,8$ <--total win by investment
    10,8 x 6 = 64,8$ <--the 60% efficacy per day
    (300 / 4,8) / 24 = 2,6 Month <--the time it takes to get the initial investment back

    This is assuming I keep placing bids at 2% of the initial 300$ investment, and the broker accepts 6$ bids with 80% pay per investment

    My Question is, is this really worth it?
    I Know that the more you invest the more you can make (thats the logic behind numbers), but you always have to keep a efficacy around at least 60% to make money or you will be loosing it, and if you make a 60% efficacy you will always need at least 2 and a half month to "double" your money.

    So just to finish, in my case to make binary options a full-time job I would need to start with an investment of at least 1500$ why that value? Well In Portugal the minimal wage is lets say 500$ per month, so the 1500% divided by 2,5 month would give me a 600$ per a month and a quarter. And don't forget that the first 2,5 months are just to take out the initial investment, only after that it could be considered profit.

    And another thing this is assuming the broker lets you make the withdrawal once you have taken you initial investment out.

    What do you Think?
    Is What I just write making any sense for you?
    I used the 60% efficacy to be realistic but It can get a lot worse, because if you don't make it to 60% you will be loosing money. I tried to use a reasonably and conservative example.

    By the way I'm a Newbie looking for answers.

    BR
    Rflip

  2. #2
    Legendry Member Michael Hodges's Avatar
    you are right, it does take time to double your account with the 2% rule.... but think about this, you double in 2-3 months, that's like a 400% portfolio yield per year.... way way way way good. AS you your account grows so too will your 2%, at $300 its $6, but at 450 its $9, and so on so your results will grow more quickly than your simple projection, but you have to keep increasing the trade amount in line with the 2% rule as the account grows.... or you could trade larger amounts and get wiped out of the market, its up to you.

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  4. #3
    Legendry Member Okane's Avatar
    Well, I was just about to write that it depends where in the world you live and
    what the minimum salary is and you've answered that yourself.
    But you are not that far away from your goal and you have to start somewhere.
    Also reality is much different than what you can calculate on a paper sheet.
    However, I think you should drop the time goals, for most of us/newbies it took
    up to 6 months or a year to pass the break even and you will only
    pressure yourself if you set such goals to double your account within this and that period.
    Your low money management is good though, the question is, can you stick with it?
    I guess you will just have to find out!
    To make sure you can I suggest you start your own diary in the members war room, it will help!
    Good Luck
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  6. #4
    Legendry Member milos's Avatar
    This part is one of the most important you will ever read about trading.Why is it so important? Well, our goal is to make money,so that we have managed to make money.We must learn how to manage it.

    Many traders are just anxious to get right into trading regardless of account size.They simply determine how much they stand to lose in a single trade and hit the button traded.

    There's a term for this type of investment called gambling.When you trade without money management.Instead you're looking for that "jackpot". Money management rules will not only protect but it will make us very profitable in the long run.

    Overloading account the reality that will happen at some point.The less you risk per trade the less will be your maximum overload.The more you lose in your account, tends to be back in the positive. Trade only with a small percentage of your account because smaller is better.

    Recommended load your account is 3% or even less.It is desirable to trade when you have a high ratio between profit and risk.The higher the ratio you are entitled to more errors.

    Another way that you can increase your chances of profitability is to trade when you have a potential to earn e 3 times more than the risk. If you give the benefit to risk 3: 1 you have a much greater ability to finish in the black in the long run.

    Also it is existed risk/reward ratio.

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  8. #5
    Moderator Kolyo's Avatar
    That is very true Milos. In binary trading it is more important the money management and to not override your chances to win. Yes with 2% risk per trade rule you won't become a millionaire overnight but you will increase the chances to survive and prosper in the long run!
    "The goal of a successful trader is to make the best trades. Money is secondary." - Alexander Elder

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  10. #6
    Veteran Member Dan21's Avatar
    To answer your question rflip, 1500 USD is not a capital to start any kind of business and trading is not exception. Trading with small capital is just the way to learn and steadily compound but not the way to live out of trading. If you want to make trading for a living you need to be much more patient and ready to learn more.

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  12. #7
    Legendry Member Michael Hodges's Avatar
    honestly, trading is hobby level until you have about 100K in your account, that's enough money to make it a business that can support you. Assumng you make 5% ROI each month, that would be about $5000 of your currency and enough to live on, up until then all proceeds and winnings should stay in your account.

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  14. #8
    Master Member SeasaltMcFish's Avatar
    It's good you use a 2% rule (if you can stick to it), but you're making one big mistake: thinking in terms of money!

    It's better to first learn to trade and only then start thinking about investing money. A steady trader will be able to make about 60-65% ITM and a good trader maybe more. First become a steady trader and then start worry about living from trading partially or complete.

    My advise: first go through our school, then start working out your trades in demo mode and only when things are familiar and profitable, start trading live. Maybe it'll take more time in the beginning, but the higher ITM % you achieve, will pay back the invested time.

    Good trading!

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  16. #9
    Rookie Member
    Thank you all for your answers.
    I know That 300$ is a low starting point, however I used that example because I think it's a starting point to a lot of newbies. My point with this post is Knowing if it really is achievable, I mean by the numbers alone I know it is if you keep a 60%ITM, but do the brokers let you withdraw your money with ease? I'm asking this because as soon as you double your first investment and withdraw it, the broker stop making any profit with you, all they are doing is loosing money. That is what is making me itchy. I understand that they get money from other traders but lets face it, if you have a business and someone is just taking money out of it, that would raise a red flag, you can not have people taking there initial investment out. I don't know if I explained myself. Sorry for my english.

    Has I already said in my Introduction I'm still learning and I'm not doing any trades yet. I'm trying to learn as much as I can, so when I tackle it I know what I'm doing or at least understand what i'm doing.
    I have traced a path that begun with the school here at BOTS, I have already read all the articles at the school, now I'm exploring this site www.stocata.org, it seems pretty good. What do you guys think about that site as a learning source?

    Once Again Thanks A lot for your answers.
    BR Rflip
    Last edited by rflip; 08-06-2015 at 11:40 AM.

  17. #10
    Veteran Member randy1953's Avatar
    Quote Originally Posted by rflip View Post
    Thank you all for your answers.
    I know That 300$ is a low starting point, however I used that example because I think it's a starting point to a lot of newbies. My point with this post is Knowing if it really is achievable, I mean by the numbers alone I know it is if you keep a 60%ITM, but do the brokers let you withdraw your money with ease? I'm asking this because as soon as you double your first investment and withdraw it, the broker stop making any profit with you, all they are doing is loosing money. That is what is making me itchy. I understand that they get money from other traders but lets face it, if you have a business and someone is just taking money out of it, that would raise a red flag, you can not have people taking there initial investment out. I don't know if I explained myself. Sorry for my english.

    Has I already said in my Introduction I'm still learning and I'm not doing any trades yet. I'm trying to learn as much as I can, so when I tackle it I know what I'm doing or at least understand what i'm doing.
    I have traced a path that begun with the school here at BOTS, I have already read all the articles at the school, now I'm exploring this site www.stocata.org, it seems pretty good. What do you guys think about that site as a learning source?

    Once Again Thanks A lot for your answers.
    BR Rflip
    Your concerns are valid. I had a problem with one of my brokers Bloombex Options . But you have to play their game.
    I made around $2000 in profit from Bloombex from a $300 deposit. I also read how many people from this broker could not get their money out so I made them think I was a big player just testing them to make sure my money was safe and sure enough they let me withdraw my funds.
    Never say you are new or you don't have money. If they think you are sitting on 10 or 15K and are looking to invest but need to make sure you can take out your money then they will play along with you. At least that's what happened to me.

    As far a brokers making their money they make tons. Remember over 95% of traders that invest loose. So for the few that win they have more enough to cover it. Take your time in selecting a good broker, read the comments from others and if you are not in the US you have a lot to choose from.
    Good luck

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