While it is possible to control risk while trading binary options, there is no way to eliminate it entirely. Before you can control risk, you’ll need to be able to determine just how risky each contract purchase is. There are several ways in which to accomplish this, and none of the following methods are difficult in the least. Consider making it a habit to assess risk levels along with each trade.
Among the most important steps will be to determine what type of price action is taking place. Highly volatile or erratic price action will carry more risk than flat or trending movement. This determination can be made by viewing technical price charts. Using the most basic setting, price movement will be displayed as a continuous line which moves up and down the chart levels as the price changes. When this line is bouncing up and down, movement is erratic. When the line is flat, so too is the movement. When it travels up or down continuously for a period of time, a trend is taking place.
Every binary options trade is linked to a specific expiry time. Once a contract has been purchased, the only possible way to exit the market would be if a Sell feature is offered. Those who are very concerned about risk are advised to trade with a binary options broker which offers this feature. The ability to sell brings with it the ability to secure some profit by exiting the market when the position is in the money. It also brings with it the ability to reduce a loss when the position is sold while it is out of the money. There are definite benefits to both.
The risk assessment process should also include some consideration of minimum investment amounts. Each broker is allowed to establish their own minimums, and these tend to vary by instrument type. While most brokers do keep these at a reasonable level, others may ask for higher per-trade minimums. For the inexperienced trader, higher minimums can be quite problematic. They can be problematic for experienced traders as well, as each loss will be harder to recover from. Risk adverse? Select a broker which asks for low minimum investments.
The payout rate offered along with each trade will provide lots of information about risk. Generally speaking, higher payouts are linked to riskier trades. This is clearly the case in regard to high-yield instruments such as One Touch. These trades can offer payouts of up to 500%, or even more. Although it is certainly not impossible to win these types of trades, do not expect them to ever offer a lower level of risk than a standard trade. Select your instruments wisely in order to keep the odds of generating a profit high.
There is no need to overly fear risk. However, there is a need to remain mindful of it. Every trader will have his or her risk appetite, and decisions can be made based upon these limits. When trading binary options, there will be several ways in which to build profits in a controlled manner. Analyze each trade, keep emotions in check, and think each decision through before taking action. Makes these actions a habit, and there will should be no serious problems.