The Profit Compounding Strategy is one the most important as well as powerful strategies for an investor to use when trading in Binary Options. Compounding can be classed as a money management strategy, rather than a straight-up profit strategy, but the returns it will yield in the long term, if applied correctly, can well exceed those of traditional profit strategies. The Compound Strategy for trading binary options (nicknamed the “snowballing” strategy) has been specifically designed to keep risks at a minimum, while increasing the levels of profit in each successive trade. The strategy can be applied to any fund amounts, and has no set minimum prerequisite that you need to have in your binary options account.
How it Works
The Profit Compounding Strategy hinges on the use of a specific percentage of the total funds in your account, rather than a predetermined amount of money for each trade. Let’s say that you have €1,000 in your Banc De Binary trading account. Instead of deciding that you want to invest a set amount of €150 or €200 on all your trades, you determine a fixed percentage, for example 10%, for all future trades, which in our case will be €100. If you place five successful trades at an 80% return, at the end of your trading session you will earn €400, raising your total account to €1400. Next time you trade, you will again apply the 10% rule to determine your investment amount, which will now be €140. If you again place five successful trades with an 80% returns, your profits this time will come to €560, a significantly higher amount of profit. Despite higher profits, however, notice that by using the Profit Compounding Strategy risk levels remained stable at 10% for each trade in both trading sessions. The percentage to be used in trades depends on the trading preferences of each individual investor, but keep in mind that higher investment percentages also bring higher risks. For this strategy to be effective, the same percentage should be applied to all trades within the period of at least a month before re-evaluating.
Not every binary options trade you place, of course, will be successful. However, as long as the profit ratio is higher than your loss ratio, or in other words, as long as you place more successful than unsuccessful trades within a trading session, the Profit Compounding Strategy will have positive effects as you will see your trading account increase along with each increased investment amount. Applying the Profit Compounding Strategy to manage the money in your trading account will bring greater profits long term, while also balancing out your risk levels.