Profit and Risk

Binary options is a numbers game.

In order to be profitable in binary options, you need to at least understand the mathematics behind it.

You need to understand the following formula:

Profit = Trades x $ Amount x ((Success x Payback) – (1 – Success))

Where:
Profit is the calculated profit in the last month
Trades is how many trades were realised in the last month
Amount is how much money you use for each trade
Success is how many trades were positive
Payback is how much the broker  paid for a positive trade

Example:
In a certain month there were 200 trades taken, with a success rate of 60%.
The broker payback is 80% and you have used $10 per trade.

Let us input our numbers into our formula:

Profit = Trades x $ Amount x { ( Success x Payback) – (1 – Success ) }

Profit = 200 x $10 x {(60% x 80%) – (100% – 60%)}
Profit = 200 x $10 x {(0,60 x 0,80) – (1,00 – 0,60)} work it out in decimals
Profit = 2000 x { ( 0.48) – (0.4) }
Profit = 2000 x 0.08

Profit = $ 160

Let us input some actual results.

We will input our August 2018 results.

186 trades taken

66% success rate

76% average payback

Profit = Trades x $ Amount x { ( Success x Payback) – (1 – Success ) }

Profit = 186 x $10 x {(66% x 76%) – (100% – 66%)}
Profit = 186 x $10 x {(0,66 x 0,76) – (1,00 – 0,66)} work it out in decimals to two places
Profit = 1860 x { ( 0.5016) – (0.34) }
Profit = 1860 x 0.16

Profit = $ 297.60

That assumes that you were trading $10 per trade.

What would the results have been with different trade sizes?

$1 = $29.76

$2= $59.52

$3=$89.28

$4=$119.04

$5=$148.80

$6=$178.56

$7=$208.32

$8=$238.08

$9=$267.84

$10=$297.60

$20=$595.20

$30=$892.80

$40=$1190.40

$50=$1488

$100=$2 976

In that month, the longest consecutive losing sequence was 8 trades in a row.

Hopefully that gives you a better understanding of how binary options works.

In summary, you need to have a success rate of 60% or better and have as many trades as possible.

As you know, on the binary platform, the payout percentage fluctuates from as low as 50% to as high as about 92%, but I would say the average for us is around 76% with 5 minute trades and abut 80 – 84% with the one hour trades.

As we mentioned to be successful with binary options trading, you need to grind away at it month after month with as much volume as possible and a success rate of at least 60%.

Account funding

We suggest to have your account funded correctly and to trade with only 1-3% of your account balance as a maximum.

In fact we strongly suggest that you only trade with 1% of your account balance.

For example if you wanted to be trading $1 per trade, then ideally you want to have your account funded with at least $100 and that would be 1% of your account balance.

A maximum for a $100 account would be $3 or 3%

Trading with just 1% of your account balance per trade is how professional traders in all fields trade and the reason is to limit risk.

Let us say that you had 10 losing binary options trades in a row, which certainly can happen, and you were trading $5 per trade on a $100 account.

That would be a 50% draw down of your account balance and you definitely do not want that.

What if you were trading $10 on a $100 account balance, which is 10% to start with? Those 10 losing trades would have wiped out your account.

However if you were trading the same $100 account and just $1 per trade and had the same losing 10 trades, then you would only be showing a 10 percent draw-down, which is quite acceptable.

Managing risk is what it is all about.

If you stick to trading just 1% of your account balance you can look forward to being able to survive the  inevitable draw-down periods and still be in the game for the winning trades.

With just a 1% trade amount per trade you can easily be looking at a 10-50% return per month.

2% and 3% could be much more profitable, but after that, the risk does not really match the reward.

Make sure that your account is funded correctly.

Seriously, this is the single most contributing factor that leads to people blowing up their accounts.

You have to manage risk and 1% of your account balance per trade is acceptable risk management, with 3% being the absolute maximum.

Having said all that, you still want to be making money at the end of the day and so you will need to be able to cover your subscription costs before banking any profit.

Therefore you should aim to have your account funded to the maximum that you can afford and trade the 1-3% of the account balance and build it up slowly but surely, month after month.

Why most traders fail at trading binary options:

Trading too large a percentage of their account balance per trade.

Success rate of below 59% continuously on a monthly basis. It is inevitable to have a losing month here and there, but you need to be getting 60% and above over the majority of your trading months.

Not getting in enough volume of trades on a monthly basis. (hint: you are going need more than 100+ trades and the more the better)

Giving up too quickly after a sequence of losing trades. You need to stick with it.

Best course of action:

Get our  copy trading deal.

You can still be doing your own trading or  adding in extra trades using our binary bot, but you want to have that basis of 100+ trades going through your account.