HOW TO MANAGE FINANCIAL RISK IN BINARY OPTIONS TRADING WELL AND CORRECTLY?

In avoiding the risk of trading properly and correctly in binary options, we have to do two things, namely risk management and risk diversification.

WHAT IS RISK MANAGEMENT?

Risk management is a set of rules, the purpose of which is to describe the acceptable amount of loss, as well as the action if it has occurred.

WHAT IS RISK DIVERSIFICATION?

Meanwhile, risk diversification is the investment of trading capital in various assets and brokers to reduce your total trading risk.

So the two things that we mentioned above must be applied in managing our financial risks in binary options trading, to avoid losses.

Risk management rules

There are several examples of what you can do to apply risk management rules in trading, including:

Invest in multiple assets

There is a saying "Don't pull all the eggs in one basket". Likewise, even the most stable of assets can suddenly lose profitability.

It is much better and smarter for you to invest in multiple assets depending on their value. For example, We can open an option for eye pairs money EUR/JPY, another option for EUR/USD, and the third option for USD/CAD. Money should be distributed according to the profitability and expiration time of the signal. For example, $3 for the first pair, $6 for the second, and $4 for the third.

Don't bet all your capital

Do not risk all the capital we have. if you have some money in your account, at least, you will have a chance to stay in the market and then compensate for the loss. Because sometimes the market may be very unstable and does not match the analysis or strategy that we apply.

To risk the amount of no more than 1-3%

We can risk an amount of no more than 1-3% of the actual deposit for a single transaction. If the risk is kept within 1-3%, then the total loss will be more or less the same.

It is necessary to open positions on several instruments but in a guaranteed number of terms. Losses from one group of assets must be offset by gains from the other. We try to divide funds between assets wisely and correctly.

Make stop-loss

In Making a stop-loss. Sometimes some traders forget that there is a time to stop, and stop-losses acting like an emergency brake in such situations are very important.

The following are two formulas that might help you calculate the level of risk while you are trading.

The formula for calculating risk in one trade

Risk in one trade = Purchase cost - Stop

The formula for calculating risk for all trading capital

Risk = Expected losses in the trade/Capital * 100