Binary Option Trading Plan

Set About Creating a Trading Plan For Binary Options If you8217ve started to look into taking up binary options as a means of financial trading then you will no doubt have seen it mentioned that you should trade to a plan. This it is said, will give your trading discipline, help you to avoid unwanted risks and also increase the profits that you can make. These of course all sound like good valid reasons to create a plan for your trading. But how exactly do you come up with a binary options trading plan and what should it look like What A Trading Plan For Binary Options Does The purpose of a trading plan is primarily to provide focus to your trading. It should detail your objective and provide you with a structure with which to reach this. It is your blue print for success, a map to guide to you to trading profits. It8217s value, as with any map, rests in it providing you with good clear instructions if you want to gain the maximum benefit from your binary options plan . Creating Your Plan There are two big misconceptions about trading plans for binary options . The first is that they have to be long and complicated. The second is that it is sufficient to spend just a few minutes on creating a plan simply to check it off your list. The reality is that you should spend a sufficient amount of time to plan in order to create something worthwhile. The goal of any trading plan is to create a blue print that you can use to dictate your trading. It shouldn8217t be so constrictive that it holds back your trading, but it should provide you with sufficient checks and balances to protect your account at the same time. A well constructed plan will address the most important parts of your trading. Here is a list of the most important things that you should consider 8211 It is important that you know what you are trading. Therefore any plan for investing with binary options should start with an outline of the markets that you are going to trade. By focusing in on just a few markets or even individual assets, you will make it much easier to focus your analysis and keep track of economic data and market news . It is a common misconception that the diverse range of markets that you can access through a binary options account necessitate that you try to trade all of them. Concentrating on just a few assets won8217t eat into too much of your time and will provide you with plenty of opportunities to build good profits on your account. Strategy And Timing These are included under the same header and to some extent one dictates the other. The strategy that you use will normally dictate the times that you trade and the time that you have set aside for trading will also dictate the strategy that you trade. To get the best from a strategy you are going to need to define the best time window for its implementation, but it is also important to set boundaries for your trading. A common mistake is to try to trade too much. Over trading is a common failing of many new traders. An over enthusiasm for profits and a desire to trade 8216around the clock8217 can see otherwise profitable strategies fail. Define the best time to trade your strategy, stick to it, and enjoy your time away from the markets. Profitability It is important that you properly work out and document the profitably of your strategy. You should know how many trades you are expect to win and the profits that this will deliver. The dealing platform provided by your binary options broker will also have an influence here. The return on a winning contract and any rebate you stand to earn on those that end out-of-the-money will have an influence on your overall profitability. Once you have worked out your profitability you will be able to refine the markets that you trade. For example if your strategy is profitable, but has a low win rate, then it may be preferable that is traded via a broker with a good rebate level. If conversely the strategy has a high win rate, with few losses, then you may be better dealing through a broker that offers the highest return. Risks And Money Management Risk management is a very important part of any plan and therefore some guidelines should be included. Working out the amount of capital to risk on each trading position is just one element of reducing your risk and managing your money well. A good money management strategy for binary options normally advocates using no more than 2-5 per contract but this will ultimately depend upon the strike rate of the strategy used. You also need to think about avoiding trading on correlated assets and any plans for rollovers or selling out of contracts early which is possible with some brokers. In fact any variable which could crop up when live trading should be reasoned and documented so you know exactly the course of action to take when the time comes. Record Your Results Integral to your plan should be the ability to record your results and monitor your overall performance. In keeping a record of the trades that you place in your binary options account you will be able to carry out analysis in to your performance which you can then feed back into your plan. There are several things that you can look out for, including Assets with a low level of profitability, poor trading results at a certain type of day, improvements to money management etc. Without an easily accessible record of this information it will be difficult to find and correct any weakness in your trading. Creating a trading plan for binary options is not difficult. It can help you to define your objectives and importantly add a process to your trading. This can not only help you to avoid making impulsive trading decisions on your account, it will also allow you to identify areas of trading improvement easily. However a plan is only as good as the trader and therefore it is vital that you stick to your plan. More From Binary Options InvestorWhen I first began trading binary options several years ago, I was fascinated by the ability to make money in such a short period of time (I traded 5 and 15 minute expirations). Unlike traditional investing, I absolutely loved the immediate gratification that can be found in trading binary options. I also liked that I did not have to wait a long time to see whether or not my trades would become winners. But it8217s that same flawed mentality that initially caused me to fail and lose my money on the first couple attempts . Fortunately, my initial account deposits were small, so the damage was easy recover from. Successful binary option trading is a business, not gambling Unfortunately, many people view binary options trading as 8220easy money.8221 This is definitely the wrong approach, and having this mentality is a surefire way to drain your account. However, the good news is that after I finally started treating binary options trading is a business, rather than a casino, the profits steadily began to roll in. Do you know many businesses that haphazardly take uncalculated risks and succeed over the long-term I don8217t. Therefore, before getting into binary options trading, it is absolutely imperative that you adopt and maintain a mindset that this is a business. Trivia Time Can you name the one common element that nearly every successful business owner (of any type) has in common Yes, they pay taxes, but that8217s not what I had in mind. I would be willing to wager a bottle of single malt and box of fine Cuban stogies that, regardless of business size or type, the one common link of every successful entrepreneur is each had a detailed, written business plan from the word 8220go.8221 Furthermore, these entrepreneurs are still following a continuously evolving version of their written business plan to this day. One more trivia question: Why do so many people trade binary options as if they are in a Vegas (or Macau) casino For some people who attempt to trade binary options, obsessive gambling is unfortunately in their DNA. But that8217s not the group I am referring to. Rather, I am asking why intelligent, careful, and even non-gambling individuals still appear to outsiders (such as professional traders) as gamblers anyway Do you know why It8217s usually because they lack a comprehensive, written trading plan. And THAT, my fellow trader friend, was precisely the problem that initially caused me to hit a brick wall. Plan Your Trades and Trade Your Plan Here8217s a mantra you need to memorize and file away in your head: 8220Every day, I plan all my trades and trade my plan.8221 Just as a GPS unit enables you to easily drive to your intended destination without going astray, a trading plan simply keeps you focused on getting to your destination (consistent trading profits) without forgetting the key rules along the way. So How Do I Go About Making A Trading Plan By now, you may be thinking, 8220That sounds great, Matthias, but how do I actually go about making a trading plan8221 Well, the good news is that developing a basic binary options trading plan is easy. It doesn8217t have to be fancy it can be handwritten or typed on your computer. The most important point, however, is that it must be written because a plan in your head is easily subject to abrupt change when your personal money is at risk. Here is what needs to be in your initial trading plan: Maximum simultaneous risk exposure 8211 It is important to determine the maximum percentage of your total account balance you will risk at any given time. For example, if you risk 5 of your account value on any single trade, and limit yourself to no more than three simultaneous open positions, the maximum risk would be 15 of your total account balance. My personal suggestion here is to start with the maximum risk exposure of 15, then gradually work your way up to a maximum of 30. I would not recommend risking more than a total of 30 at any given time, as a substantial losing streak could wipe out your account. Maximum individual risk exposure 8211 This is simply the maximum percentage of your account you will risk on any individual trade (such as 5 in the example above). Again, 5 is a conservative starting figure that allows you a large margin of error while learning the business. As your confidence in profits grow (thanks to our winning binary options trading signals), you may consider increasing this amount to 10 per trade. But again, I would not recommend ever exceeding this level. Brokerage selection 8211 Many new traders of binary options simply open an account with the first broker they come across on the Internet. This is a mistake because the types of options available, financial stabilityreputation, payout percentages, withdrawal procedures, and other key factors vary greatly from one broker to another. So, do your homework and compare these elements. Obviously, you have many choices, but I have personally been very happy with the recommended brokers listed on this page (open a new qualified account with one of these brokers gets you free access to Binary Signal App). Preferred payout 8211 The most reputable brokers give you a choice on the payout percentages you wish to receive. Generally, the greater the percentage payout you choose for winning trades, the lower the rebate for losing trades. Therefore, you need to decide which payout level you will choose in each and every trade and write down. My advice in this regard is to select the lowest payout percentage in the beginning, because you are likely to have a higher percentage of losing trades why you8217re still learning. But as you get better at picking winning trades, it makes sense to increase the winning payout percentage you will receive. Time frame 8211 Typically, you8217ll be able to choose an option expiration time of a few minutes up to an entire day. The benefit of a shorter time frame is that it allows you to see the results of your trade, and potentially realize profits, rather quickly. But the disadvantage of trading in such a short time frame is that it8217s more difficult to predict price action. Conversely, trading binary options with a longer timeframe requires a bit more patience, but the direction of the price may be much easier to anticipate. Binary Signal App currently provides you with both 5 and 15-minute trading signals, so you don8217t have to wait long before seeing the winning trades. Get the idea One key point is that your trading plan only works if you follow it (refer back to the mantra above). So, be sure to print it out and keep it near your computer at all times. This is only the first blog post with my binary option trading tips, but I8217ve got a lot more details I will be posting on the blog in the coming weeks (remember to bookmark this blog) to set you on the path to profitable binary options trading using Binary Signal App. Nevertheless, you can throw all the rest of the upcoming trading strategy tips out the window if you don8217t take the time to implement this first rule of developing your initial trading plan. In my next blog post, I will tell you all about the most dangerous thing to be on guard against in the business of binary options trading (hint: find the mirror and you8217ll be looking at it). Then, I will share with you some more simple, yet very powerful rules help me become the successful binary trader I am today. Download our Android app to try our live binary option trading signals free for the next 2 weeks (just 50 per month to continue after the trial period).Trading Concepts: Creating a Trading Plan Start a business, you need a plan. With no direction or planning for how you8217ll make a profit, your business likely doomed. Trading is no different, if you want to succeed, you8217ll need to think of trading like you would a business. After all, through your research, skills and ultimately your money you8217re making an investment in yourself, which hopefully will produce consistent profits and the lifestyle you desire. This doesn8217t happen by accident (at least not often). It happens by creating a plan for your trading, and outlining exactly how you will trade. Creating a solid plan is a key step that all beginning traders should take, as failing to do this will likely result in simply failing. Creating a plan leaves your emotions out of trading. When you watching your trade turn into a big loss or a big gain your mind can spin, causing you to deviate from the original strategy you had in mind, if you had one. The trading plan takes care of this. It gives you methodical instruction on exactly how to handle each trading situation should arise. It also tells you how to handle multiple trades. As a trader you may want to make more than one trade, but because you are anxious about your other trade you decide to skip out on a good opportunity. Alternatively, you may take on too many trades, exposing yourself to too much risk. A solid trading plan not only tells you how and why you are making trades, but also how you will handle a number of trades (if you so choose). Probably the main benefit is that when you follow a plan you see what works and what doesn8217t, and can monitor your results. Random trades, where you just buy and sell for any reason that strikes you, provide no useable feedback, because yours wins and losses will be as random as the impulses that generated the trade. Only by following a plan can you see if the strategies you are using actually work, or not, so you can make calibrated adjustments to improve. Before You Begin In order to create an effective trading plan, you need to consider several things thing before you begin: What style of trading best suits my personality If you are someone who is low-key and prefers little drama, then you will likely want a trading style that is more in line with swing trading or investing. If you like action, then align your trading style with a more active style of trading such as short-termday trading. Are you going to trade binary options, stocks, forex, futures, or a combination Each has advantages and disadvantages pick your markets(s) so you can create a plan for that market(s). What are your objectives Why are you trading Simple saying you want to make more money isn8217t clear enough. Define what you want to make, and why8211buy a car, buy a house, pay for kids school, etc. Your trading plan is the plan to get there, based on your resources, trading style and how often you trade. How often you trade will likely be determined by the entry and exit rules for your trades. There are many excellent trading strategies out there, or you can create your own. Some basic entry methods are covered in my recent article Capitalizing on Lower Highs and Higher Lows in Price. Once you find a strategy you like, use this section of your plan to outline exactly how you will enter trades based on the strategy. Your entry rules outline what market criteria must be in place for you take a trade. Here are some questions to ask yourself to get started. Does an indicator need to reach a certain level to take a trade Does the price need to break an important level Do entry signals need to occur on a specific chart, such as a 5 minute, 15 minute, or hourly chart. Do all trade signals get traded, or will you use a filter to screen some trades out Do you enter exactly when a criteria is hit, or do you wait for a price bar to close before entering Think about your strategy, and then formulate exactly how you will enter those trades. If you use multiple strategies, this process must be done for each individual strategy. How to get out of a trade is arguably more important than how you get in, since your exit is where you make or lose money. Therefore, your exit rules must stipulate exactly how you get out of both winning and losing trades based on your strategy. If you are trading binary options. your profits and losses are fixed and therefore this section may be quite brief, since your broker essentially exits your trades for you. If you trade other assets, this section can get quite extensive. You8217ll need to determine where you will place a stop-loss order8211an order which will close your trade and limit the amount you can lose. Where the stop-loss is placed must be determined before any trades are made, because without it, you don8217t know how much you are risking on the trade. Once the trade is in motion, you may choose to implement a trailing stop. A trailing stop moves with your trade, reducing your risk or potentially locking in a certain profit once the trade moves in a profitable direction. You8217ll also need to outline if any profit targets will be used. Profit targets are pre-established price level or percentage-return levels at which you close your position (or part of it) to realize a profit. You may choose another exit method, such as exiting simply when the criteria that got you into the trade disappears. If you entered because a trend was in place when the trend breaks that could be your exit. Outline your method for exiting profitable and losing trades, in fine detail, for any scenarios that may arise. Money or risk management is the most important aspect of the plan. A basic rule for money management is that you shouldn8217t risk more than 1 of your trading capital on a single trade. This is why you must determine your stop-level in the Exit Rules section. Once you set a stop-level, you know what your risk is. Once you know your risk, you can determine how many contracts or lots you can buy. Managing your position size is crucial, as buying too much can create additional risk, while buying too little may make it difficult to reach your objectives. In this section also consider whether you can take on multiple trades, or only one at a time. If you take on multiple trades, can they be correlated If two assets are highly correlated, and you buy both of them, you are essentially taking the same trade, and doubling your position size. Consider these factors, and outline exactly how you will manage your money, risk and positions in order to reach your objectives. Creating a trading plan will take time, but is well worth the effort. It should be very detailed, and at absolute minimum contain the sections discussed above. As you trade, things you didn8217t consider will occur, and you8217ll need to go back and tweak your plan. Once your plan is profitable though, avoid tinkering with it. The point of the plan is make your trading systematic, so you see what works and what doesn8217t. If you constantly change the plan it won8217t have time to show you if it is really working or not. Take the time to make a plan, because lack of planning leads to trading failure.