Binary options are one of the newer and getting more popular derivative financial instruments (so-called derivatives). By investing in binary options we do not buy a specific asset, but only speculate whether its value will increase or fall. Binary options are a much easier investment tool than the Forex market. With proper education and market knowledge, you have the opportunity to make a regular income – the customer can not lose more money than his deposit, but the amount of potential earnings is also limited in some way.
The biggest advantage of binary options is the extremely simple money management, which in the case of the forex market is a huge affliction of many traders and does not allow them to make regular income. In the case of binary options, we determine the amount we risk and the amount of our loss in case of failure will never exceed that value. Another plus is the fact that we do not have to wonder where our stop loss or take profit should be.
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The most popular bid for binary options is to determine whether the price of the instrument will increase or fall over a specific time period. It is comfortable that even if the market is not moving from the beginning, it may be possible that it will follow desirable direction later on.
The biggest minus of binary options, which should also be mentioned, is the relatively small profit / loss ratio that most brokers offer less than 0.85:1. This means that our potential profit will always be lower than any loss. So to be able to earn in this way we must have extremely high efficiency. Is it possible to earn via binary options?
For a long time, on the pages of comparic.com, I run the “Option for Today” cycle where we present the best PUT or CALL options for a selected financial instrument and its current technical analysis every day. All analyses of the series are based on the Price Action rules and can be tracked under the “Option for today” tag or in our forum where binary options are discussed.
Recently I also publish detailed statistics showing the results of my analysis. In August, the efficiency was 78.95%, which means a return on investment of 7.12:1.
This time in September, the efficiency of my analysis was 76.19%, which means a possible return on investment of 6.9:1.
That means that by risking 1% of your capital each month, we could earn as much as 6.9% a month. I believe that as a monthly rate of return, it is very high and should be satisfactory for most traders.
Taking into account that the longest string of losses was only 2 and the longest won was 6 (6.26% at 1% risk), one could even consider using Martingale as a model for capital management and position size. Of course, it should be remembered that this is a very risky method, which, with a long string of losses in a row, is able to zero out our account in a very fast time.
What is martingale?
Martingale is a roulette-style rule that after lost trade the next should be doubled. In practice if we risk 1% of our capital, if we lose we bid in next trade 2%, then 4%, 8% etc. in each successive lost position. If we have 6 successive losses- our account is emptied…
However, if someone would be able to bear such a risk, thanks to efficiency of 76.19% would be able to earn not 6.9:1 but 12.42:1, which at the risk of 1% of capital in each single position gives 12,42% in just one month.
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