Binary Options Trading – Crunching Numbers

Understand the Numbers

As a trader for over 8 years now I can tell you that although the act of trading binary options is very easy, the odds are not in your favor and you need plenty of experience and skill to make them work. They are as close to gambling as you can get when trading and if you are not an experienced trader I strongly suggest you read through the Forex Trading Basics and Forex Trading Strategies sections of this website first. Learn how to trade in what appears to be the hard way before you attempt Binary Options, you will thank me later. Binary Options remove your ability to use a good risk:reward strategy and they also require you to assign time to your trade, these are two major disadvantages and the ‘hard way’ is actually the easier way.

10 Trades Per Day – Same Trade Size

I have crunched some numbers for you just to save you the trouble, there is no breakthrough math here but it will give us a quick visual on what is required to be profitable. These first tables will just use the same trade size each time and are based on taking 10 trades per day then calling it quits.

Although the above table would be the common numbers that you may use, in the spirit of being thorough I will fill in the gaps with some more just below. You have probably noticed already how bad the risk:reward is when attempting Binary Options and I feel this is important to keep repeating. Add on the need to predict how long a trade will take and these Binary Options Brokers sure have tipped the odds in their favor as much as they can.

If you can maintain an above 70% win rate then you can make money from Binary Options, albeit very little, but it is important you find a demo account first and prove that to yourself. To make a living from it you would really need to maintain an 80% win rate as a minimum with days where you are in the 80-90% range. This is a tall order for the average person.

Three Level Martingale – Requirements and Results

Major confidence is required before you start playing with the martingale approach but higher risk always brings a higher reward potential. There is no need to be a cowboy here though and you need to limit your martingale to just a few levels in order for the overall math to work out. Let’s take a look at the numbers if you were to apply the martingale without going to extremes where it wouldn’t make any sense.

As you can see this is all based on each time you win 34 times OR each time you lose 4 in a row, whichever comes first. For the sake of this example let’s just look at it as a daily target, you either win 34 times without losing 4 in a row, or you lose 4 in a row and call it a day. Remember, that doesn’t mean win 34 without a loss, if you lost one then won one a bunch of times then you may end up needing 40 or so trades for the day in order to get those 34 wins but your losses would be negated by the amplified next win. What you need here is to prove to yourself on a demo that it will be extremely difficult for you to lose 4 in a row.

In order to make some kind of living here you can see in the above table what your weekly income could be. Preferably you would want to lose a maximum of 1 day per week but with the higher base amounts you could get away with losing 2 days per week as a worst case scenario.

Just to be thorough once again let’s run some more numbers on the same concept.

Based on the above table being your daily target once again let’s check out the weekly results.

Two Level Martingale – Requirements and Results

Major confidence is required as always before you start playing with the martingale approach but higher risk always brings a higher reward potential. If you want to limit your exposure a little from the previous martingale tables then you may want to consider limiting your martingale to just two levels. Let’s take a look at the numbers if you were to apply a two level martingale approach.

As you can see this is all based on each time you win 14 times OR each time you lose 3 in a row, whichever comes first. For the sake of this example let’s just look at it as a daily target, you either win 14 times without losing 3 in a row, or you lose 3 in a row and call it a day. Remember, that doesn’t mean win 14 without a loss, if you lost one then won one a bunch of times then you may end up needing 20 or so trades for the day in order to get those 14 wins but your losses would be negated by the amplified next win. What you need here is to prove to yourself on a demo that it will be extremely difficult for you to lose 3 in a row.

In order to make some kind of living here you can see in the above table what your weekly income could be. Preferably you would want to lose a maximum of 1 day per week but with the higher base amounts you could get away with losing 2 days per week as a worst case scenario. Going two levels deep on the martingale instead of three means less trades are required per day, but you also will make less and can only lose 2 in a row to stay profitable instead of 3. Once you lose 3 in a row on this two level approach it would be game over for the day.

Just to be thorough once again let’s run some more numbers on the same concept.

Based on the above table being your daily target once again let’s check out the weekly results.

Can You Beat a 70% Return?

Your average Binary Options Broker, on the low end, seems to offer a 70% return which is why I have crunched the numbers based on that. I have however come across a broker that offers up to and over 100% returns which is why I even became interested in using Binary Options to scalp the market. They seem to also drop below 70% sometimes which is a concern and something I am watching closely now to see if this is an intelligent option not, at the very least they do offer a demo account that does not appear to expire so you can at least practice with no risk to you.

Get a No Risk Binary Options Demo Account Here

Understand When Binary Options Should be Used

As I just mentioned above I am interested in using Binary Options to scalp the market, when scalping very small moves it is nice not to have to think about the spread. If you are not scalping and trading any chart above the 5-minute chart though, Binary Options are not the smart choice. You can enjoy 100-400% returns on any one trade when trading intra-day and intra-week, only when you have mastered that do I even feel that Binary Options would be worth a look. Visit the Forex Trading Basics and Forex Trading Strategies sections of this website to learn how to read price action no matter what you do. Just try and understand the logic of what was just said before you attempt something like Binary Options.