This is a guest post by Ahmad Hassam
Binary options are a new way to trade the market volatility. You simply have to bet whether the market price will be above or below a certain strike rate in order to make returns like 181% per hour. Once you enter the trade, you don’t need to monitor it. It is set and forget. Either it will end up in the money or it will end up out of money. No need to worry about the stop loss or the take profit like in forex trading. Your risk is already calculated once you enter the trade and is equal to your investment.
But in order to have a high win rate you need to do technical analysis in order to determine at what strike rate you should buy the put or the call. There are now a number of good binary options signal services that can help you avoid spending hour doing the complicated technical analysis. In this article, we will discuss a simple trading plan that can help you turn your $300 into $50K trading not more than 10 minutes a day.
First do a little research and find a binary options signal service that has a win rate like 60-70%. Suppose you find a binary options signals service that has a win rate of 60%. What this means is that out of every 10 trades, you will win 6 and lose 4. Lets discuss the money management system that can help us turn $300 into $50K in 5 months!
Suppose, the binary options signals service gives 20 signals in one month and the return on each trade is 181%. What this means is that you will be trading only once a day that will not take more than 10 minutes of your time. Suppose, you start with a deposit of only $300. Divide your deposit into ten trades of $30. On average you will win 6 and lose 4 if the win rate is 60%.
Making a $30 trade means making $54.3 in case you win. At the end of ten trades, your net profit should be on average $205 and your equity will be $505. Now increase the trade size to $50 and make the next 10 trades with this trade size. You now will make $90.5 per trade and your net profit for 10 trades will be $343. So after 20 trades at the end of the month, your equity will be $848.
In the second month, for the first 10 trades increase the trade size to $90. Each trade will make you $162. In 10 trades your net profit will be $612. Your equity will now become $1460. Increase the trade size to $150 now for the next 10 trades. You make now $271 per trade and your net profit for the next 10 trades will be $1029. So by the end of the second month, your equity will become $2489.
In the third month, increase the trade size to $250 for the first ten trades of the month. Your return per trade will now be $452. Your net profit for 10 trades will be $1712 and your equity will now become $4201. Now, again increase the trade size to $400 for the next 10 trades. By the end of the third month your equity will grow to $6945.
In the fourth month, increase the trade size to $700 for the first 10 trades. Your return per trade will now become $1267. Your equity after these 10 trades will become to $11,747. Now again increase the trade size to $1000 for the next 10 trades. Your equity will be now $18607.
In the fifth month, for the first ten trades increase the trade size to $2K. Your return per trade will now become $3620. Your net profit for 10 trades will be now $13,720 and your equity will grow to $32,327. Once again now increase the trade size to $3K. Your net profit at the end of the month will be $20,580 and your equity will now be $52,907.
In nutshell in this money management system increase the trade size after every ten trades. You can try variations to this simple formula as well. The beauty of this money management system is that even if the win rate somehow comes down to 40%, you still make profit and not lose your money. If you increase the number of trades to 30-50 per month with a win rate like 70%, do the maths you will make a lot more if you follow the above steps.