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  1. #1
    Moderator Kolyo's Avatar

    Risk Management. How do you manage your risks in Binary Options trading? !!!

    The most important element of every successful strategy is the risk management. It is a must to master this aspect for everyone who wants to survive in the long term and become a great trader. This thread is open for discussion on that important topic. How did you manage risks in your everyday trading? It will be extremely useful for all of us and especially for novice traders to read the risk management tactics from more experienced ones.

  2. #2
    Senior Member Deanfx's Avatar
    Very interesting thread! I didn’t find anywhere else discussion on binary options risk management and hope that here will start a good one. I am especially interested how much money you prefer to risk as a percentage of your capital in a single trade?

  3. #3
    Junior Member allanrock's Avatar
    Let’s say I prefer to risk not more than 1% of my capital in any particular trade and because in binary options you risk what you invest (or 85-90% of it) I never purchase an option which is bigger than 1% of my capital and that’s not all. I never purchase second option during the active time of already purchased option. I only trade one option at a given moment.

  4. #4
    Solid Member Peter Green's Avatar
    Did you change that number from trade to trade or you risk exactly the same amount in each binary option. I am very interested what is the biggest drawdown in your equity that you could afford to lose without losing confidence in your system? In my practice account I have several periods with very big drawdowns, but hopefully I rebound again.

  5. #5
    Junior Member allanrock's Avatar
    Well, I change it from time to time, but the point is that the total risk never exceeds 1% of my account capital. In this way if I have let say 10 consecutive losers my drawdown will be still 10%, which is manageable and I have several times in this range, but never more than 15%.

  6. #6
    M.J
    M.J is offline
    Veteran Member M.J's Avatar
    One advantage of binary options over forex is that u know ur risk before purchasing/entering into a trade. Another good risk and money management technique is diversification. Try to diversify ur money in different assets which could decrease ur risk as well as increase ur knowledge of market.

  7. #7
    Specialist Member RCox's Avatar
    Quote Originally Posted by Kolyo View Post
    The most important element of every successful strategy is the risk management. It is a must to master this aspect for everyone who wants to survive in the long term and become a great trader. This thread is open for discussion on that important topic. How did you manage risks in your everyday trading? It will be extremely useful for all of us and especially for novice traders to read the risk management tactics from more experienced ones.
    Good idea for a thread, I was actually thinking of posting something like this myself. It has already been said that one advantage of binary options comes with the fact that you are well aware of your total risk level before any trade is placed (which means that you are not vulnerable to markets gapping over your stop losses in other forms of trading). One of the ways I look at risk is to make sure that I am buying things at cheap prices and selling them at over extended prices. While this might seem totally obvious, there are many strategies in the markets that do the opposite (ie breakout strategies) but I think these strategies put on too much risk and this can be largely avoided when taking more contrarian views.

  8. #8
    Moderator Kolyo's Avatar
    This is the point RCox. We all have different views on the risk and we measure it in different ways. If you are more a kind of a bargain hunter, you will search for undervalued stocks and if they really are, than you will have a low risk opportunity. When it comes to intraday trading the risk will be lower if you trade close to support and resistance levels and your stops are close to the current price. In Binary Options the risk management is clearer and more easily implementable. I think this is one of the main advantages of BO compared to other trading instruments.

  9. #9
    Senior Member raymond09's Avatar
    Actually I follow my own strategy and I set my strategy according to my money management policy. So I never take huge risk. I do only take 5%-7% risk of my total trading balance to prevent margin call. So If I get loss this time, I will overcome it on next trade for sure.

  10. #10
    Solid Member boart's Avatar
    Quote Originally Posted by allanrock View Post
    Let’s say I prefer to risk not more than 1% of my capital in any particular trade and because in binary options you risk what you invest (or 85-90% of it) I never purchase an option which is bigger than 1% of my capital and that’s not all. I never purchase second option during the active time of already purchased option. I only trade one option at a given moment.
    That's the way to trade. Totally agree on this one..and just to make it safer, once an account is in positive I only use ''house'' money for trades...for example: Capital $1000 - win a trade - and return is $20- I will only use the $20 on the next trade, building it slowly, to a point where I don't risk my own capital at all. Stress Free trading and it should after all be fun, Not? Those huge 10% of capital trades can make a 5 min Expiry seem like a lifetime.

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