Risk Management in Binary Options

When you invest your bitcoins, there is always some sort of risk involved. Binary options, just like any other form of financial trading, is no different. You could lose most of your invested capital, if you are too careless or greedy. The proper model of risk management (sometimes called bank management) is something you are expected to consider as soon as you start your binary options trading experience. We will base our analysis on BitPlutos platform, the very first binary options platform running exclusively on bitcoins.

The widely accepted bank management rule adopted universally by professional binary options traders is that no more than 5% of the account size should be invested in the assets at any given point in time. So, if 2 BTC is your current balance, you should not invest more than 0.1 BTC at any given time. Trading anything more than this is already thought of as “risky”. Losing 50% of your trading capital is different to losing only 5%, isn’t it? This is very important, keep that in mind and you should never go bankrupt when trading binary options with BitPlutos, otherwise you will fall prey to what we all want to avoid when trading – gambling.

Trading at BitPlutos is pretty much like forex where you can minimize your losses early if you see that you are likely to go “out-of-the-money”. In general, BitPlutos is the broker that gives back up to 15% of invested capital in trades that are out of the money (dependent on asset), but if you intend on complying with the risk management rules, you will also need to use other tools which will be discussed below.

Roll-Over

Imagine you’ve opened a new trade, and it’s going to expire in 30 minutes. You’ve been in-the-money so far. Suddenly, notice that the asset you’ve invested in is now starting to change its direction and you are now out-of-the-money and you see no reason that the trend is going to stop. This is where Roll-over comes into play. What does it mean and how does it work? It means that you can extend your expiry time. You’ll be asked to add a certain percentage to your investment, usually 30% of your initial investment amount. But there is also the advantage of it – If your option expires “in-the-money” at the end of that period, you win more money (your initial investment + 30% extra are now your basic investment, remember?).

Check out the screen below to see where the Roll-over tool is located (search for “Open Positions” below the trading platform)

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After clicking “Roll-over”, you just have to select a new expiry time. Below it, you can see you the new investment amount (30% extra)

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A few points to remember:

  •  the Roll-over feature is available only for Binary that are out-of-the-money
  • there is a time period when you can use the Roll-over, usually it is terminated 10 minutes before the expiry
  • you can use the feature only once per trade
  • when properly used, it may minimize your losses and let you bounce back when market volatility occurs

Double Up

Doubling up is a similar concept to the Roll-over. You’ve probably guess it right – you double your investment. So one can either make bitcoins very fast or lose them very fast – it all depends on whether the trade goes in one’s favor or not. There are two situations that are suitable for Doubling Up:

  • the trend is steady and in your favor: keep up with it and open another pro-trend position. Mind you: avoid charts that show rapid market movements. Only steady trends (lasting for at least 1 hour) are to be used here!
  • a trend correction is about to happen: you opened a trade but you were not right about it, you are out-of-the-money. But from the chart your can clearly see that the correction is almost here. Double it up – it should compensate for your first loss as the system opens another option with the same direction but a different strike price (the current one).

Check out the screen below to see where the Double Up tool is located (search for “Open Positions” below the trading platform)

doubleupdoubleup

Check the current asset rate (strike price) and decide if you want to double it up with the same amount (1 BTC).

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A few points to remember:

  • the Double Up feature is available for most of the option types
  • you can use the feature only multiple times per trade
  • when properly used, it may maximize your profits and compensate for losses

Sell

The opportunity to sell one’s position is highly underestimated by traders. People’s greed usually takes over the safe yet less profitable trades. This is a wrong approach though. In fact, selling your position at the right time can guarantee you constant profits. They are substantially lower than the regular binary options profits but they are pretty much assured.

First off all, you can use the Sell tool to get rid of the option that is out-of-the-money. Obviously, the price offered to you will be substantially lower that your initial investment, but at least you will not lose the whole amount. And the price is 100% dependent of the current market situation: the more you lose, the worse price you get. And vice-versa.

But what if your option is in-the-money? Well, this is when the real fun begins. Yes, you can sell it too! And get your profits, relatively small, but without waiting for the expiry. The price you get is also reliant on the market situation and will never be as high as if you waited patiently for your option to expire, but your profits are way more secure this way. Just wait for you option to be in-the-money and check for how much you can sell it.

Check out the screen below to see where the Sell tool is located (search for “Open Positions” below the trading platform)

sellsell

Check the current price that you can sell the option for and decide within 3 seconds what you want to do (the price is always on the move due to the market conditions, you can reload though). As you can see, you already get 15% from your option.

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A few points to remember:

  • the Sell feature is available only for some of binary options types
  • there is a time period when you can use the Sell feature usually it is terminated 10 minutes before the expiry
  • when properly used, it may minimize your losses and let you gain small but consistent profits. Perfect for patient investors

Important: availability of the above discussed tools may vary depending on the type of binary options you choose to trade.

But how shall one figure out whether to double up, use the rollover tool, sell it or go on with the investment already made?

It’s a question of bank management. For some traders, it’s simplest to avoid rollover or doubling up and continue with being very consistent about their investment amounts. Other traders love these features – they’re good at taking advantage of good opportunities when they arise (double up) or using Roll-over as the last resort. It is all a matter of practice. We recommend practicing on historical data and consulting your Account Manager before establishing your trading strategy. Different methods call for different techniques, and different personalities are suited by different money management styles. The only way to find out what’s best for you is to test for yourself.

We all hope to win but the truth is that there will be times when we make bad trade calls. No one is perfect, don’t expect to be either. It has happened to everyone; even the greatest investors suck at times. But what separates those who re-emerge as successful traders from the rest is the ability to control their risk. Please control yours too.

And we have a very special gift or all the readers: sign up now and get NO RISK trades with BitPlutos! What does it mean? It means that the broker will return your lost trades back to your trading account! The amount of no risk trades is negotiable and depends on your initial deposit. For those who feel more comfortable, the broker offers up to 100% Welcome Bonus. Just open your account with one click below!

For more info, go to www.bitplutos.com or email at: [email protected] 

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