Money management and signals

money management and signalsOne of the great advantages of signals for binary options is that they allow you to manage your money yourself. To combine money management and signals as effective as possible, there are a few simple tricks that can make the difference between winning and losing money. In this article, we will explain these tricks.

In detail, we will answer these questions:

  • How do I combine money management and signals?
  • Do signals guarantee profits?
  • How do I start making money on binary signals?

With the answers to these questions, you will know everything you need to use money management and signals to make money.

How do I combine money management and signals?

Signals for binary options allow you to outsource your market analysis. A professional service analyzes the market for you and alerts you to profitable trading opportunities. All you have to do is follow the instructions in these signals, and you will be able to trade binary options based on professional market analysis.

Of course, there is also the possibility fully to automate your trading. Robots will also invest for you, allowing you to outsource your complete trading process.

The reason why most people choose signals over robots is that robots are bad at money management and that money management is a critical aspect of financial investments. Ideally, a good money management system defines a fixed percentage of your overall account balance that you invest in every trade that you make. This percentage should be somewhere between 2 and 5 percent.

With this type of system, you never invest more than you can afford.

  • As your account balance grows, your investment per trade grows accordingly, continually allowing you to increase your returns.
  • If you should suffer a losing streak, you would reduce your investment per trade accordingly, allowing you to survive the losing streak without going broke.

This is the ideal system. You are always investing the right amount of money, and the calculation of how much you should invest could not be easier. Simply take your total account balance, multiply it with your fixed investment percentage per trade, and you know what to do.

It is important to stick with this system when you trade signals, too. To many traders, importing the knowledge of experts seems to be reason enough to abandon their old money management and invest more, ignoring caution and taking risks they would never take if they invested on their own. This is a recipe for disaster.

While relying on expert knowledge can pay great dividends, even the best experts are far from infallible. The market often moves in random ways, and all analysists have to deal with this unpredictability. Consequently, everybody will suffer a losing streak sooner or later, the odds dictate it.

Even the best signals will sooner or later lose you a number of trades in a row. To deal with this challenge, here is how you should manage your money:

  1. Start by investing 2 percent of your overall account balance per trade. This way, you limit your risk and can test your signals.
  2. After at least 100 trades, evaluate your signals. Determine which percentage of your trades you win, how your highest number of losing trades in a row, and your highest number of losing trades that were interrupted by only one winning trade. With these numbers, you can evaluate the risk of your signals realistically.
  3. Increase your investment per trade incrementally. If you should find that your strategy runs safely with an investment of 2 percent per trade, increase your investment slowly. We recommend increments of 0.5 percent. Try your strategy with an investment of 2.5 percent per trade, and if you do not experience major setbacks over a longer period of time, go to 3 percent, and so on.

Follow this system until you arrive at a strategy that makes you money but does not include big risks.

Of course, finding this balance depends on your personal tolerance for risk. Some risk-averse traders might want to stick with the initial investment of 2 percent while risk-taking traders might want to move to the full 5 percent. Most traders will be somewhere in the middle.

Do signals guarantee profits?

The important point we can’t stress enough is that signals alone do NOT guarantee profits. With signals, too, you will win some trades and you lose others. As long as you keep investing random amounts of money in every single trade, you will sometimes invest too much money into a losing trade, digging yourself a big hole that it will be difficult to climb out of.

With random investments, even the best signals do NOT guarantee a profit. On the contrary, there is a big chance that you will lose money in the long run.

To make money with binary options, you need to get the odds in your favor. You do that by winning a high enough percentage of your trades – this is the part signals can help you with – and by spreading your investment evenly over your trades. Without this even spread, a high winning percentage is useless.

The theory that you need to win enough of your trades to make money already assumes that you evenly spread your money across trades. If you invest random amounts in each trade, even winning 80 percent of your trades might be useless because you might invest 80 percent of your money in the 20 percent of trades that you lose. In this case, you would lose money, too.

This is why you need a good money management. With good management, you make sure that the high winning percentage of good signals translates to positive earnings. You guarantee that, when you win 80 percent of your trades, 80 percent of your money goes to winning trades, and that you make money in the long run.

Without such a system, you would sooner or later invest a big part of your money in the trades you lose. Even if you made big profits before this point, this unlucky turn of events would eat up most of your account balance and throw you back to where you started.

With signals for binary options, long-term success is only possible when you manage your money well. If you do, good signals can guarantee long-term success. If you don’t, even the best signals guarantee nothing.

How do I start making money on binary signals?

If you are just starting out with binary signals, here is how you can start to make money. Simply follow this plan:

Step 1: Choose a good signal provider

There are so many signal providers for binary options out there that it can be tough to know whom to trust. To make things easier for you, we have tested all relevant signal providers and listed the best of them in our top list. Take a look at our top list and pick the provider you like best. You can hardly go wrong with any of them.

Step 2: Test your signals risk-free

When you first start to trade new signals, there is no way for you to know whether or not the signals work or how much you can safely invest in a single trade. Luckily, there is an ideal way for you to test these things without risking anything. This way is the IQ Option demo.

IQ Option is one of the best brokers for binary options. For users of signals, IQ Option is interesting for two reasons:

  1. IQ Option offers some of the highest payouts for high/low options, which are the classic option type to trade signals.
  2. IQ Option offers a deposit-free demo, which allows you to test your signals without investing anything.
Trade with IQ Option now

Start trading today with a small deposit of only $10 with IQ Option!

 

The high payouts on high/low options make trading profitably easy. In the past, IQ Option has offered an average payout of 85 percent for the currency pair of Euro and U.S. Dollar. With such a high payout, you would only need to win 55 percent of your trades to make money. Since you can easily find a signal provider that offers an accuracy of around 70 percent, you should be able to make money with IQ Option in any case.

The deposit-free demo allows you to test your system completely risk-free and investment-free. Simply log in to the demo with your Facebook or Google account or with your email, and you can use all of the functions of a regular trading account with play money instead of real money.

Use this system to trade your signals for a while. You will soon now how much money you can make with your current signal provider. If you can turn a profit, stay with the provider and start trading the signals with real money. If you do not like the signals, cancel your subscription and try another provider. In this way, the IQ Option demo guarantees you that you will never lose money with binary options signals.

With other brokers, you lack both of these advantages. These brokers require you to get a regular trading account before they allow you to use their demos, which involves depositing at least $250 with the broker – a needless expense for someone who simply wants to try some signals. Additionally, these brokers offer lower average payouts on high/low options, often only around 70 to 75 percent. For you, these payouts mean to deny yourself an easy money for no good reason.

Because of these two reasons, IQ Option is the ideal broker to make your money management a lot easier for yourself. While good money management will always be a major factor to your trading success, picking a great broker such as IQ Option can increase the profits of your money management significantly.

If you want to get started with IQ Option now, follow one of our links to the IQ Option website.

Conclusion

Money management is the most important component to add to your signal trading. Only money management can guarantee that quality signals will lead to quality trading and profits. Without good money management, you will eventually lose money, regardless of how great your signals are.

Make sure to invest only 2 to 5 percent of your overall account balance in every single trade, and you should be fine. We recommend to start with 2 percent and gradually increase your investment as your bankroll increases.

With the right broker, you can make your money management a whole lot easier. We recommend using the IQ Option demo to test your system and then profit from IQ Option’s industry leading payouts on high/low options to turn a profit.

With this system, money management and signals should be a powerful combination for you.

Money management and signals
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