Bankroll Strategy & Trading FX Binary Options
The Bankroll Strategy attempts to install a money management approach to your binary options trading. In order to do this you must first define your trading goals. For example, are you a high volume trader who is happy with making small gains on a series of trades throughout the trading day? Would you rather keep your profits in your account, leverage your gains by increasing the size of the bets as the account gets bigger? Or would you rather implement a combination of both these approaches?
Let’s analyze this in further detail
Now, for some traders, trading binary options is a way to earn additional income. Money earned from trading is used to pay bills or help out with other expenses. If you fall into this category, your options are limited. Not only that, but adding pressure to trading for most people is seen as a negative. Good traders focus on execution and following through with their strategy. The profits and losses are an end result of this process.
For example, if you recently lost two straight trades and see a great setup on the third trade… but don’t take it because you’re scared to lose, then psychology has taken over your trading. This is not the right way to trade. Remember, you can put on a good trade and it can still end up losing money. What’s important is the process. Ideally, you’d like to put yourself in a position where you have considerable edge. Of course, this is easier said than done. At some point in time, psychology will play a factor in everyone’s trading. Great traders learn to control their emotions and focus on their process. That’s why they say it’s best to only trade money you can afford to lose.
By deciding you want to extract profits constantly from your account, you are putting more pressure on yourself. You have to believe in your system (approach), timing has to be excellent, psychologically you have to control your emotions and be able to handle drawdowns when they come. Does this fit your personality? By trading frequently, you expose yourself to a lot of randomness. This in turn, exposes the trader to greater risk. With that said, over-trading before you have a true grasp of binary options trading can take you out of the game quickly. The key is to trade small until you get a feel for the currency pair!
Some traders love starting each day with a clean sheet. The Bankroll Strategy, fails to mention a trader’s skill level, bet size or personality type. In our opinion, these factors also need to be incorporated.
Long term approach has its benefits, but doesn’t guarantee success
Sure, trading less often will keep you in the game longer. Not having pressure to bring in returns and having a long term perspective is a great thing. The ability to leverage your winners by increasing the size of your bets is an excellent way to grow an account. However, the trader still needs to be skilled, they need to understand the currency pair they are trading and they have to size their bets appropriately.
In conclusion, it makes sense to trade small in the beginning, paper trade, do not trade unless you’ve found your edge. Everyone wants to make money right away, but it’s important to have patience. If trading was easy everyone would be doing it. Work on your process and developing your skill set.
The type of trader you decide to be ultimately should be based on your personality type. A bad trader will not make money if they choose a short term approach or a long term approach. This is a game that requires skill and a little bit of luck. Once you’ve identified who you are as a trader take the approach that best fits you. There is no right or wrong answer here. Everyone is different. However, if you are new to the game, give yourself a chance to succeed by not over-trading and paper trade your ideas.
