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Risk Management

Risk Management

Binary trading can certainly be a tricky business. As with any endeavor there is always the possibility of losing so here are a few tips to maximize your chance for success

  1. Knowing what the risk is

    • Volatility: movements in the price of underlying markets can be volatile and unpredictable.

    • Market swings: swing is a sudden shift in the price of an underlying stock price from one level to another. Various factors can lead to gapping (for example, economic events or market announcements) and gapping can occur both when the underlying market is open and when it is closed. When these factors occur while the underlying market is closed, the price of the underlying market when it reopens can be markedly different from the closing price, with no opportunity to close your trade in-between. 'Gapping' can result in a significant loss (or profit).

  2. How to manage it

    • Understand your market: it is important to understand the assets and markets on which you are taking a position. Learning each asset’s volatility and establishing the probability of sharp price movements is essential when considering the risk associated with each trade. For example, historically some assets are less likely to make sudden discontinuous jumps, while others may be more likely to make sudden movements. Financial markets by nature can move in directions that cannot be forecasted based on history of the asset

    • Actively Monitor: While we can and should use trends to predict which assets to trade when, financial markets by nature can move in directions that cannot be forecasted based on a history of the asset. Being on top of your trades and ready to adapt to sudden moves is imperative.

    • Utilize Tools: There is a wide variety of tools available to traders. These tools can give contributions ranging from market analysis and deciphering trends, to actual trade monitoring. Know what tools are available to you and making them work for you is essential to bolstering your trading.

 

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