It is something you have probably heard time and time again, but one of the most important rules of investing is not to invest more than you can afford to lose. However, it is still a point which needs to be made, if only to make you aware that as many people lose when they trade binary options as they do win. Before you begin trading in binary options, you should ensure that you have a money management plan in place, and that this plan is well thought out.
If you only use surplus income, rather than money that should be used for your essential living expenses, it won’t matter too much if you do lose money at first. A good plan that is followed by many successful traders is to set aside no more than 10% of your disposable income for your monthly trades. This will ensure that any losses are kept to a minimum. When you become more confident and start to become more successful, you can increase the amount of that you trade to between 20 and 30 percent of the income that you have available.
You do not have to use all of your income in one trade. For example, if your disposable income is $1000, then you will have up to $100 to trade with. You can put this all on one trade, or make two trades of $50 or four trades of $25 for example. Using these figures, even if you were to lose the trades that you make, you would still have $900 available, but if you were to win then this figure would rise to $1100.
More trades can be made during the month when you are only using small amounts of money, and this can help you get the practice you need without risking too much of your money. The longer the period that you can trade over, the more chance you have of finishing with more money than you started with. It can help if you chart your results as this will give you a clear picture of your current position, and can help you decide whether you need to increase or decrease the amount that you are trading with. Following this strategy can help you increase the amount of money you have to invest month by month, which means you are able to generate more income.