Learn How to Manage Risk in Binary Options Trading

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Learn How to Manage Risk in Binary Options Trading

Posted on by John Thiel

All forms of trading involve some degree of risk. It doesn’t matter if your buying shares of BP stock based on positive quarterly results or EBITDA data,or selling short BME because you think austerity measures in Spain won’t measure up to Standard & Poor’s credit rating criteria – you will always have some degree of risk involved in  trading.

Your ability to read market sentiment and analyze the stock patterns using Japanese candlestick charting techniques and chart patterns like a cup and handle (or cup without a handle) will mean the difference between your contract expiring out of the money or hopefully having it expire in the money.

If you look at the pivot of the handle you will see that it didn’t break after the midpoint of the base. When you look at the buying price for risk A and risk B, you will see a projection arrow indicating the range based on the moving average line and the 50DMA upward projection.

This is just one tool out of many that will help you make a better and more informed decision when you manage your binary options risk portfolio. But before that you need to make a decision about how much you are willing to risk, (or invest) and what type of ROI you are expecting to get. So lets say that for all intents and purposes you invest $1,000 in AAPL and you believe that because the new and timely Ipad launch in China revenue will increase and so will consumer confidence in the stock which has performed very nicely during the last few years.

So, in essence you will be engaged in a type of financial betting, and assuming you dont use more advanced technical trading techniques like Bollinger Bands, you will speculate that the moving average line for AAPL options will expire after (lets say 6 hours) in an upward trend. Or in binary options terms, you will put a call bid and based on the payout for that specific contract you will see how much you stand to gain if it expires in the money. Many binary options platforms advertise up to 81% return on investment. Usually its less depending on the underlying asset.

Some of the investors that I have met mentioned that they are hesitant about trading online with the new binary options trading sites and even advised me that its a binary options scam perpetuated by ex-gambling companies, and prefer to stick with the regulated exchanges like NADEX or the CBOE or go through ameritrade or scottrade or alternatively private binary options brokers.

So before you start to engage in binary options trading, its best you sit down, look at some of the basic tools out there (there are many), and start formulating a binary options strategy or system based on the right trading signals. Before you go out there and start investing, its best to open a demo account and also take a look at some of the binary options brokers reviews.

If you think you have read enough and want to trade simply click Here to start.

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