In binary trading, as with any financial system, you should study the numbers before you commit to anything. This article gives some insight into how 2 key values will determine both your risk and reward:
The first of these numbers is Payout Percent - how much profit you make on a successful trade. This one is readily available from your broker, and usually ranges from 60% to 80%
The second is more difficult to quantify - your prediction accuracy. It is how accurately you are able to predict a trade's results. For example, 100% would mean never failing, 50% would indicate that you might as well be guessing, and 80% means you get 4 out of 5 trades correct.
To calculate your prediction accuracy, take your trade history and divide total wins by total overall trades. If you don't have a history, then set up a demo account somewhere and experiment, trust me you want to compare to actual numbers not just randomly guesstimate you accuracy (a 5% difference in predication accuracy is the difference between really risky trading and mostly safe trading).
The first of these numbers is Payout Percent - how much profit you make on a successful trade. This one is readily available from your broker, and usually ranges from 60% to 80%
The second is more difficult to quantify - your prediction accuracy. It is how accurately you are able to predict a trade's results. For example, 100% would mean never failing, 50% would indicate that you might as well be guessing, and 80% means you get 4 out of 5 trades correct.
To calculate your prediction accuracy, take your trade history and divide total wins by total overall trades. If you don't have a history, then set up a demo account somewhere and experiment, trust me you want to compare to actual numbers not just randomly guesstimate you accuracy (a 5% difference in predication accuracy is the difference between really risky trading and mostly safe trading).
All values shown below are for a starting balance of $250, with an unchanging trade size of $24, and a $0 return on losses (the minimums allowed by my broker - 24Options).
Calculating Binary Trading Risk
This table shows the percentage chance you have of losing all invested cash over a period of 1000 trades (we limit it to 1000 trades to avoid the complexity of mathematical limits as total trades approaches infinity). This wasn't calculated using abstract/esoteric equations, but rather by using an easy to verify simulation that ran millions of times and returned averages (written in Python) .
This table shows that even a highly accurate indicator coupled with a high payout still entails some risk. I can't tell you what level of risk is good for you, but at least with this you can make better informed decisions. Interestingly the larger your initial balance the less risk of losing everything (not shown here), this is because at least a few of the high accuracy simulated traders had runs of bad luck early on and ran out of cash thus introducing some bias.
This table shows that even a highly accurate indicator coupled with a high payout still entails some risk. I can't tell you what level of risk is good for you, but at least with this you can make better informed decisions. Interestingly the larger your initial balance the less risk of losing everything (not shown here), this is because at least a few of the high accuracy simulated traders had runs of bad luck early on and ran out of cash thus introducing some bias.
Average Return Per Trade
This is probably what you're really interested in, the average profit per trade for a given accuracy-payout pair. This table only includes values for simulated traders that did not go bankrupt, which means these values are on the optimistic end of the profit scale.
This table can give a good idea of how frequently you'll need to trade to reach your daily income goal (on average). For example, if you make a single winning trade at 80% return, your profit is $19.2 - but that value alone is pretty meaningless as you don't know how often you'll get that win. But if you know that you're right 60% of the time and the return is 80% you end up with an average profit of about $1.95 per trade, so to make a daily profit of just $10 you'll need to make about 5 trades.
This table can give a good idea of how frequently you'll need to trade to reach your daily income goal (on average). For example, if you make a single winning trade at 80% return, your profit is $19.2 - but that value alone is pretty meaningless as you don't know how often you'll get that win. But if you know that you're right 60% of the time and the return is 80% you end up with an average profit of about $1.95 per trade, so to make a daily profit of just $10 you'll need to make about 5 trades.
Daily Trades for Desired Profits
I'll bet you have a daily income goal you'd like to achieve using binary training. This little calculator can help with that, by telling you how many trades you need to make each day to reach your daily profit goal for a given average Return Per Trade (which you can take from table 2 above):
RSS Feed
