Binary Options

An important part of your binary options career is being able to honestly assess how successful your trading actually is. This is important for many reasons, the most obvious being that if you know how much money you are bringing in, the better you can handle your finances. You don’t want to stick with something that is a constant drain on your bank account, but you also need to make sure you give yourself time to surpass the learning curve. Trading binary options is tough, so you want to give yourself plenty of time to learn.

Measuring your success goes beyond dollars and cents, although this is the most basic metric for your ability. You also want to examine your correct trade rate. This is especially true for beginning Binary Options traders who might not be varying their amount risked. For example, if you are trading a flat $100 with every trade, your success rate is going to be very important. If you are not right often enough to overcome the gap between the payout and the loss amount (usually around 25 percent), you won’t be making money. This means that you need to be right more often than 50 percent of the time in order to be profitable. One simple way to evaluate this is to look at a hypothetical 100 trades of $100 each and plug in what your correct trade rate is. You also need to plug in what your return rate is. Assuming that you have a return rate of 75 percent and a correct trade rate of 58 percent, the math looks like this:

58 x 175

58 for being right 58 percent of the time, and 175 for the return of your investment ($100 initial risk amount plus $75 additional return). If you take into account the $10,000 that you would be risking over the course of 100 trades, this equals a profit of $150.

Of course, once you advance your trading career, your amount risked will not remain static. You will pump more money into the trades you are most confident of. This means that a simple correct trade rate will no longer be a good way to measure your success. Instead, you need to start looking at percent returned, rather than the dollar amount returned. Percent returned has a more universal appeal to it since this would be the same way for a small trader and a bigger trader to compare their success. A 15 percent return shows comparable ability regardless of the size of your trades. Think of it this way, who is more successful: the man who earned $100 trading with $1,000 units each time, or the man who earns $100 with $10 units? They both earned the same amount, but the man trading $10 units has a much higher return on his investment. This indicates that if he were trading larger amounts, his dollar profit amount would be much higher.

So measuring your success is a good way to know whether it’s time to bump up the amount you are risking. It also will let you know if trading binary options is a leak on your bank account. Either way, measuring your success in a consistent and effective manner is an integral part of trading binary options.