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How much should I trade with binary options? Hmmmm, this is a question asked by traders all the time and can be answered in a couple of different ways. The two first answers that pop into my head are always actually more questions. How much can you afford and how much will wipe out your account. The first question begs two more. How much can you afford to deposit with a binary options broker and how much can you afford to put on a trade.
They are a financial instrument, but they are not an investment. They are a derivative trading vehicle with no underlying value and meant purely for fun. Now, with this in mind we can now step forward and address the question at hand. Binary options are not investing. They are an easy to use, short term, highly speculative bet on a moving market. They are meant to be an easy way to enter the market because they are also meant to be fun.
They are short term and speculative for the same reason. By no means is trading binary investing so the first step in knowing how much to trade is to only trade money you can lose. Binary is not the place to keep your savings, those belong in a real bank, and it is not the place to invest for the future. By extension, it is also not the place to put your rent money, especially if you need it to pay the rent. Simply depositing money into a binary options accounts means it could be up to a month just to get it back.
This is the place to put your fun money. Money that has no other purpose than to provide you access to the market because trading the market is what you like to do. It may limit your choice of broker but there are lots of good ones. Then you can go find a broker with a slightly higher minimum. In either case you can still start trading. You just have to be responsible about it. The key is never to trade too much, never so much that it hurts your ability to trade again. Having rules to guide the amount you trade are the best way to know how much to trade.
This amount means I can have up to 20 trades open at any one time and no one of those trades will ever be big enough to hurt my account. I also never have to waste time trying to decide how much I should trade. I just do it. This way I am sure to maximize any potential profits and limits losses at the same time. Some brokers only allow certain increments of amounts so you will have to round to the nearest allowable amount.
If you like a little more risk maybe you round up, if you want to be a little safer you round down.