This factor is as relevant as the trading strategy, in fact, the best strategy if it is not accompanied by a good money management turns out to be a loser. The big traders pay close attention to the Money Management, especially when they operate in particular market phases where the risk is higher than average.
There are many manuals and even entire books about money management, that offer a new and different perspective on how to deal with trading.
A good money management weighs the risks of the market and the risks of the strategy then calibrates the right amount of money to invest in each operation. As it may seem complicated, the procedure to follow is quite simple.
MONEY MANAGEMENT OPTIONS BINARY TO 10 MINUTES
Binary options, as we have seen in previous articles, offer many opportunities for trading, supported by some of these signals really easy to find. Binary options offer many opportunities in 10 minutes of trading, especially when you consider an extremely liquid market such as forex and a very volatile currency pair such as EUR / USD.
To reduce the risk you must obtain a risk / return ratio equal to 1, ie, the percentage of capital that risk must be equal to the gain obtainable. To guarantee this relationship we need to find a broker that gives us 85% of earnings and that it also has a 15% refund in the event of loss. Doing this we will have a ratio of C 85% (100-15) = ¬ 85%.
The second step to increase the odds in our favor by reducing the probability of loss is to operate at times when the market presents the greatest opportunity: this happens from 9 am until 17 pm.
HOW MUCH CAPITAL DO YOU RISK?
We arrived at the crucial point, the capital that we risk should grant us many chances to recover in case of loss, thus exploiting large numbers. If we decide to invest ¬ 100 for example, we would never invest a 10% for a single operation, we have only 10 chances that, though many, there should not be enough.
A good money management does not require a capital investment in excess of 5% of the ownership interests. Initially almost all inexperienced traders tend to want all and now, they risk up to 100% of capital, reducing their chances to the minimum.
Always remember that investing does not mean gamble, but it requires careful consideration of the risks involved and the benefits derived therefrom, of course, the percentage of capital depends on the risk appetite of the investor, but must never be driven by this propensity to risk more than 5%.