The ultimate goal for anyone trading in binary options it to make profits. Many traders concentrate on strategies. They spend their time watching tutorials and reading eBooks about strategies. In as much as these strategies are important, they won’t be of much help if you cannot manage your money. Money management comes first as far as trading strategies are concerned. Even in other businesses, an enterprise with the potential to make profits will quickly go under if you cannot find a way to manage the money available well.
One of the commonly applied money management strategies is compounding. Compounding ins binary options are similar to what is known as plowing back profits in business and entrepreneurship. Compounding allows you to increase the staked amount, but maintain the same risk level as you continue to profit. The more you profit, the more the staked amount increases and the more the revenue. The strategy allows your profits to grow over time into substantial amounts. It is important to note that you might lose are times. Therefore, the results or the amounts will not always be typical. It is also important to ensure you make very low-risk trades to make the strategy sustainable.
So, how exactly is the compounding strategy employed in maximizing profits from binary options trading?
How to Employ Compounding to Maximize Your Profits from Binary Options
Let’s take a hypothetical situation so that we can fully explore how compounding works. Let’s take it that you have deposited $2000 in your broker account. You then open five one-week trades staking 10% of the capital on each trade. At the end of the week, you get a 70% profit on the trade assuming you win all of them. At the end of the week, your total balance will be $2700. That’s a profit of $700.
If you repeat the same for the send week, you will get a profit of $945. 10% of the new balance is $270. Therefore, each of the five trades has a stake of $270. The total amount staked is 1350. If it turns out right for the second week, you will get a profit of 70% of 135, which is $945.
As evident, the profits continue rising every week. Of course, there is a caveat that the assets you choose to trade with remain with the same trend week after week. All you need to do is to set the staked amount for each trade to be a certain percentage of the available balance, rather than a fixed amount. That means as your profit, the profit (indicating your speculations are turning out right) you can profit more by plowing back your profits in the same line of predictions that is working for you.
Most of the times, you will not win all the five (or any other amount of trades you put), so the results won’t be the same. If you have a sustainable strategy and you are a better part of all the stakes, say 4 out of 5, your profits will continue going up with time.