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Interaction with counterparties in the financial market is like a game. However, despite similar signs, namely the absence of a clear result 100%, the presence of such outcomes as a loss or a win, this is a serious occupation that has every right to become a full-fledged job with good earnings.
Along with the stock and currency markets, the options market is no less popular. A binary option is a financial instrument that is a bet on a decrease or increase in the price of an asset over a certain period of time.
A bet is made into a deal between two or more market participants. Thus, during a binary option, the commodity turns out to be a contract, and the trader predicts the behavior of the asset.
The main two categories of option trades are:
- CALL - down contract
- PUT - upgrade contract
The amount of money circulating in these transactions on the market is overwhelming.
A trader, having registered on the site, acquires any assets: stocks, currency pairs, futures, commodities or raw materials. The skill of the player and the success of his activity lies in how accurately he predicts the increase in the value of the asset or its decrease, so as not to drain the deposit.
The time during which the predicted situation (price decrease or increase) can occur is the time for which the contract is concluded. It can range from one minute to several days.
If the trader's forecast coincided with the trend that has arisen in the market, the transaction amount is returned to him with a percentage. If the assumption about the trend is not confirmed, the transaction amount is credited to the broker.
Tips for beginner traders
Novice players in the binary options market, already starting the game, need to have certain knowledge. As mentioned above, you can not approach the activity on the site only as a game.
The market is subject to specific laws, it undergoes changes in accordance with a set of patterns that must be taken into account when predicting trends in it.
Therefore, at the very beginning of the development of the expanses of digital platforms, there should be a toolkit of analysis methods, for example, technical, wave.
At the first stage of working with the site, you should use a demo account. This is a virtual amount that is provided for mastering the skills of working with options.
Of course, you won’t be able to get profit from transactions with it, but you will be much more confident in the future, dealing with a real account.
Experienced specialists advise to make at least 100 trades with a demo account and start real trades only when the percentage of successful ones exceeds 50%
Also, debutants should choose a broker who has set a minimum deposit of $10 on the site. By registering the results, you can determine the next threshold for increasing the deposit. And the transition is worth making only when you have achieved success in 60% transactions.
In order to make a profit, not a loss, during the games in the market, it is important to follow a certain set of rules.
Implementation of the basic rules of money management. One of them is the maximum transaction amount. It should not be more than 5% from the deposit.
Using Risk Management Rules. If you decide that the minimum amount will be up to 5% from the deposit, and this step can be insured with the help of interest distribution.
In different market situations, a trader can be more or less confident in the outcome of his forecast. In the first case, you should choose a higher percentage, the maximum, that is, 5%, in the second, a lower percentage, for example, 2% from the deposit.
Choosing the Right Platformoffered by the broker. The choice should be for reliable sites, with excellent ratings set by independent experts.
Development of your own optimal strategy, based on a combination of the player's toolkit.
Applying Risk Management Secrets can not only protect against losses, but also increase the overall percentage of successful transactions. These include such a tool as the diversification of transactions. There are currency diversification and its other types.
Currency diversification – conclusion of transactions with different currency pairs. Also, to minimize the risk, you can apply the principle of distribution over several trading instruments.
At the initial stages of work, on the sites it is not recommended to use the Martingaine method, which is based on an increased risk. Its proper use requires expert knowledge of the market and its trends.
Reasons for trading in the red?
Summarizing the above, we can list the main reasons why trading on binary options turns out to be negative. Mistakes should be avoided and the right approach to determine the player's strategy should be chosen from the very beginning.
Lack or lack of knowledge about the principles and tools of trading in the market.
Missing the opportunity to master the rules of making deals, to study the intricacies of trading, a beginner at the first stage often gets a negative result.
The best way out is to develop your own strategy, based less on intuition and more on careful analysis and the right choice of tools.
Lack of discipline. Excitement and the illusion that after a few successful trades the business will also go further, the lack of consideration for trends leads to a loss. You should be calm about both losses, of course, within the limits recommended by the risk management rules, and takeoffs, which can create a feeling of euphoria and lower the quality of the analysis.
Ignoring the principles of risk management. The transaction amount should be a reasonable percentage of the deposit amount, and it is better to distribute the transactions themselves among different assets, that is, diversify.
The tendency to take more risks with smaller deposits. Too little deposit, when you already have some experience, leads to a decrease in interest in trading due to small profits or to the desire to take on more risky trades, which can lead to a loss.