Risk in binary options
So your first step is to identify and sign up with a broker that will allow you to place trades within the confines of your acceptable risk appetite.
Binary options brokers have made this very easy, because the moment a trader pushes the button to purchase a contract, the trader is immediately shown the cost of purchasing that contract. He cannot lose more than what he spent purchasing the binary options contract, so for every contract purchased, the amount at risk is known and the potential reward is also known. This enables the trader to do what is necessary in order to keep his risk within acceptable limits.
In binary options, payouts are made up of your invested capital and your profit. However, this is for a single trade. Binary options has grown up in many ways but so have the scammers. Every time I find a new good broker I find a new scam to match it; the trick for any trader is to learn to spot them.
For newbies it can be a challenge. Shady brokers put a lot of effort into looking legit. Some go as far as cloning the name of a well known financial company to lure traders in, others create fake regulatory agencies to give them a stamp of approval. In the periphery are all the schemes, trading systems, autotraders and gurus who claim they can make you rich. I know its tempting but if it were really that easy then everybody would be rich.
If it, whatever it is, has real value it would cost money. Get Your Head Out Of The Clouds — The second way to limit risk is to keep it real, get your head out of the clouds and come back down to earth. It is also risky, challenging and not something everyone can master. The essence of all this is to protect your account from the devastating effects of losses in a single trade where too much capital was invested.
You may think this is over the top but you will be surprised at how often many retail traders succumb to the destructive emotion of greed and try to dare the market in this manner.
Do not fall prey to this. We all hope to win but the truth is that there will be times when we make bad trade calls. It has happened to everyone; even the great Warren Buffett lost millions in October But what separates those who re-emerge as successful traders from the rest is the ability to control their risk.