There are two main motivations for trading binary options. One is that you’re a gambler, and you’re looking to have a good time doing some exciting wagering on financial instruments. The other is that you’re a serious trader and you’re trying to become profitable on a long term, reliable basis as part of a system for making money. Your goal might be to trade for a living. In either case, it’s important to learn how to trade binary options responsibly. Obviously if you’re trying to trade for a living, the last thing you want to do is trade irresponsibly, or you won’t make any money. If you’re gambling though, it’s also important to budget your money so that you don’t overspend.
Main Key = Money Management
The main key to trading binary options responsibly is money management. This is how you handle your bankroll. If you’re planning to trade as part of your actual income, then you’ll also need to have a trading method and a plan in place so that you can trade consistently. Money management determines how much you’re going to wager on each of your trades. It should be a percentage, preferably a small one like 2.5-5%. As you grow your account, the amount of money you invest grows with it since the percentage accounts for a higher sum.
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If you are trading for fun, you don’t need a trading method to enjoy yourself, but you might want to try using one anyway since that increases the odds that you’ll actually make money. Even if you don’t decide to do this though and you’re content to win or lose, you want to learn how to manage your bankroll so that you can get the most entertainment for your money. This again means deciding to wager a small percentage, since otherwise all it takes is one or two big losses before you’re out and you have nothing left to trade.
Don’t quit your day job until…
Trading binary options is a high risk activity, and any binary options broker which is worthy of your business will tell you so openly. As such, you should only risk money which you can afford to lose. Don’t quit your day job to trade until you’re profitable consistently and you make more through your trading than you need to get by. Don’t wager money which you need to pay your bills.
The last thing you should ever do is persuade yourself that you know what you’re doing when in fact you don’t. Responsibility means acknowledging risk, having some humility, and knowing you can lose. That’s the case even for traders who are very serious and have powerful trading methods. But it’s especially the case for gamblers who make their trading decisions randomly. There’s nothing wrong with gambling as a form of entertainment, as long as you acknowledge that you are indeed gambling and that you’re likely to lose money. Trade responsibly and your money will go further, you’ll have more fun, and you’ll be more likely to win over time.