A binary option is a form of trading where you will risk a certain amount and either
gain or lose. It will, therefore, be determined by the price of your underlying asset is
above or below a specific price. In case you are right, in your account, you will get a
prescribed payout. However, if you will be wrong, you will lose the capital you
wagered.
No matter the binary options that you will trade, either the traditional or current
binary option, the “position size” becomes essential. The position size is the amount
you risk in every single trade. So, the amount you decide to risk doesn’t have to be
random or based on how you are convinced on a specific trade to work on your favor.
You have to, therefore, view the position size as the formula you need and thus
become useful in every trade.
The amount you should risk while trading binary option
However, are binary options safe? How much do you have to risk? The amount you
have to risk need to be a small percentage of the overall trading capital. It will be your
decision about the figure for the amount you are planning to risk. However, it’s not
recommended to risk more than 5 percent of your capital because the professionals
are risking 1 percent or amount less.
In case you are having $1000 in your account, you have to keep the risk to $10 to $2
that will range 1% to 2% per the trading option. You can also risk 5% as an absolute
maximum but not recommended.
If you want to trade in binary option, you need to make a lot of money and quicker.
The reason why most people attempt trading is to make quick cash, and you have to
avoid the impulse. If you risk a lot of money while trading, you will empty your
account instead of creating a windfall.
For beginners, they don’t have the necessary trading method that they have tested and practiced. So, they don’t have an idea of whether they are good traders or not. It is better for one to risk a small amount of their trading capital on each of the binary
options. It will help in testing their trading methods and also improve their trading
skills. It will also help to gradually increase their trading amount after they are
consistent.
Determining the risks of binary option trading
For binary option, they have fixed risks. It is something that will in advance tell you
the amount you can lose when the asset you expected doesn’t perform as you wanted. In binary option, the risk will be the amount you plan to wager.
In case your wager is $20 on the binary options trading, then your maximum loss
could be $20. Some of the traders will be offering a rebate for the losing trades you
make. For example, with the case, your maximum will be $18 when given 10%.
How to determine binary option position size
You should know the amount you are planning to risk with binary option. It is also the
amount you could also lose if the trade goes unsuccessful. You have to, therefore, tie
them together and calculate the amount you are willing to wager on the trade.
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