Know Your Risks Before You Get Burned

Binary options websites are sometimes accused of being nothing more than gambling websites in disguise. It’d be easy to say that this is completely true or completely false, but neither would be an accurate statement. Legally binary options trading is not considered gambling exactly and many claim it is 100% legit and legal in the USA. See [source]. Now, whether or not that it 100% true, you’d have to ask an attorney to find out.

But what is true, is that trading binary options is risky enough on it’s own merits that you absolutely must trade with a reputable broker.

Unfortunately many of the people to whom binary options appeal are indeed common gamblers. They see banner ads promising them incredible returns with very little effort, and they jump right in without ever calculating risk, working out money management plans, or coming up with a reliable method, much less testing that method before applying it with real money.

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Can You Control The Risk And Put 100 Dollar Bills In Your Pocket?

If you want to become a real trader and not just a gambler then you have to develop a binary options trader mindset. Learn methods and test and practice them. Find a winning strategy that works for you. That’s true whether you want to trade binary options or you want to do some other type of trading. Any market on the planet can be a gambling floor if you treat it like one. So let’s take a look at binary options risk and how you can get started trading profitably.

When you are choosing a broker to invest with, you’ll want to take a look at the returns. While binary options trades are called “all or nothing” trades, they aren’t necessarily all or nothing. Many sites will give you a percentage for each win and a percentage return for each loss. For example, TradeRush.com might offer you 70 percent on each win, and 10 percent back on each loss. For every loss, you’ll lose 90 percent of your investment—that’s 20 percent more than you get with your wins. The “house” (your broker) has a very definite edge on you here.

If you “invest” $100 on two trades and you win 1 and lose 1, you don’t break even. You win $70 and lose $90. That puts you $20 in the hole. So you need a higher win percentage than 50 percent in order to be profitable. For that matter, if you made 1000 trades of $100 and won only 60 percent of them, you’d only make $600! And yet, if you manage to get a win percentage like 70-85 percent (with all else being equal), that’d be a stellar statistic. The good news is that if you always invest the same percentage of your total account, you’ll be investing more and more as you build it up, which will eventually make your returns theoretically exponential.

Learning What You Do To Win

What this should tell you is several things.

The first is that you need a substantial (though not tremendous) bankroll to get started, or you won’t be making much. The second is that you need a strong win percentage that is extremely reliable in order to profit. So what you need to do is create a reliable, consistently profitable trading method, one which you test, with a spreadsheet.

Calculate your risk for every trade, check your win percentages and other statistics, and only once you have a proven binary trading method and you’ve demo tested in real time profitably should you consider investing real money.

If you understand the risks and rewards and want to start trading binary options then choose a broker from our recommended list and good luck with your trades!

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