It’s secret because traders rarely talk about it.

I’ve realized from my interaction with numerous traders that it is “extremely” difficult to succeed at trading (Binary option) because the odds of success are stacked against the trader despite being advertised as a make money fast instrument by the brokers.

Binary Options; the type of trading instrument that requires a trader to speculate on the direction of an asset with the possibility of earning between 70-90% ROI per trade.

First, Why Binary Option (and other market) traders consistently lose





I will easily answer this because a lot of traders keep asking this. Traders play the game the wrong way. You walk into a casino, you have $1,000 tucked in your pocket making it look fat, all the beautiful girls are around your table inflating your ego, you are then subliminally imposed with one mentality — “YOU ONLY WIN IF YOU MAKE A BIG WIN”.

This is not how a professional traders think. I am not willing to risk all my capital on “this table”, I am not plotting to make the biggest hit of my life right now, I am more concerned about playing the game to get small wins on a consistent basis, which means my trading plan is not dependent on the roll of a dice but on clearly written plan. Trading isn’t lottery, it’s a business.

But, how do these Brazillian traders do it ?

Flipping $10,000 into $21 Millions in about 3 weeks — That is Sound money management.


I have also been participating and sometimes I win in competitions asides from my usual real market profit.

Just like every athlete, online trading competitions are my training grounds and there’s a money management technique used specially for competitions which is more preferable than “martingale” — which is a gambler’s tactic to spend all his money at the table or leave with a large profit on the strategy of “hope and faith”.

In the picture below, this is one of the competitions I won using the money management system.


Most traders try to avoid any type of trading that involve “options”. Not everyone has been able to achieve a consistent and profitable Binary Option career, those who have achieved that, understand that there are secrets and most don’t like to share these discoveries.

The four types of Money Management Systems

Your Money management would be based on your trading methodology, so you have to understand the type of trader you are, and more importantly which one of these would best leverage your strategy for maximum profit.

  1. CBOC — Constant Based Off Capital; Trader chooses an appropriate single risk percentage — 3% for every trade. We recommend between 1% and 5% per trade, as the trading balance — $100 increases or decreases because of activities in the market, the new amount to be used for every new trade will be calculated as a percentage, which is then calculated based off the current balance.

Illustration; Jim chooses to use only 2% of his account with CBOC, he currently has $100 in his Options account, if after the first trade he incurred a loss of $2 ($100x0.02 = $2), the $2 is the amount he will risk per trade.

His next trade would be ($98x0.02 = $1.96), with an assumed ROI of +80% per trade, if this second trade wins, his new total balance would be $99.56 and that is what generates the next trade amount, which would be $1.99($499.56*0.02).

This system ensures that your current balance is directly proportional to your trading performance, your risk follows suite. It is advisable for you to also keep a loss limit (‘risk control’) to a daily of between 15-30%.

This is very important because your system can and will experience bad days but will always reward you for your losses if it’s a working system.

2. CBOP — Constant Based Off Profit; This is the similar in method with CBOC, the difference is that this system trades on a percentage of the realized profits only ((current balance - opening balance) *0.02). When your profit has hit a threshold of about +10% to +50%, you can begin using this system to secure a long term hold of the profits, only the profit is taken into context for calculating the risk amount. And as the profit amount grows, the risk amount put into each trade is adjusted.

3. FAB — Fixed Amount Based; This system uses a fixed amount per trade consistently throughout an entire trading session . This is a fail safe system for traders who are beginners or who are still undisciplined. If you often find yourself trigger happy, switching from following a standard system to rolling the dice in your style of trading, this system is for you.

A particular fixed amount is chosen off the trading capital and used consistently throughout the entire trading day.

Daisy has $1000 in her trading account, and she decides to use FAB, she decides to trade $50 FAB from her balance. Either subsequent trades Win or Lose, she uses only $50. This is good for traders with a balance above $1,000.

4. TSC— Three Step Chain; This is a ‘chain-like’ model for trading the markets. However, this is the most risky method, TSC prioritizes limiting your losses and enables growth minimally.

This is how it works;

  • step1: cut out a fixed fraction of your whole trading capital — e.g 15%
  • step2: divide that value into 3, in the ratio “1:2:2” or “2:2:1”, You have to understand that, your strategy should be in the direction of the trend and not a counter-trend strategy, now depending on your experience and your trading pattern, you can understand which of the 3 trades in the cycle has the highest probability of a win, you then go ahead to allocate properly, given our balance to be $1,000–15% TTC would mean a maximum of $150 per session is our risk.

The first trade and second trade is usually the strongest in our system;
first trade: (2/5x150 = $60)
second trade: (2/5*150 = $60)
third trade: (1/5*150 = $30)
Total risk is $150.

When a session/cycle is over, a new session means trading $60, Please also keep maximum limit of loss should be -15% and not more. and this can only happen by losing 6 trades in a streak, definitely, that would imply a really bad day in the market.

Money management system for Competitions

In competitions, you are given a starting balance and you compete everyone else to grow that balance within a stated period of time.
The balance is not a real balance but there is a reward for being at the top of the board.

Here’s how it works:

  • You have $100 tournament balance.
  • You get a signal for BUY.
  • Allocate a fixed percentage between 15–25%. That would be $15–$25.
  • Next is to divide the $15 into equal parts of small chunks, E.g $3 per trade to an exposure of $15 and total of 5 trades.
  • Now, you simply re-enter the same trade expiration at Pullbacks.
  • A more technical approach would be to draw a Fibonacci while you take trades in your direction when price hits points in the Fib-line.

The unique feature observed is that when the trade loses, you do not lose ALL of your 15% at a single trade and the risk can be spread across the different entry points.
E.g;



Conclusion

Trading can be thought of has a ‘one-hit wonder’ thing, where you eventually land one trade that changed everything for you. This can surely happen, but, I urge you to think of trading as a lifelong journey.
The psychological implications are very important.

  1. You do not need to trade 24-hours a day to be profitable, the money is always in patience and following a system that works — Binary option is about the entry price than it is about how many pips movement the market makes.
  2. DO NOT predict the market. Trade what you see, not your expectation — Ease comes from not fighting the market but accepting what it gives.
  3. Stick to one strategy and one money management system at a time and avoid switching between systems midway.