Optencis
A strategy decides whether you can win. Money management decides whether you are still trading long enough to find out. Even a good method goes through runs of losses, and the way you size your trades decides whether such a run costs you a bad day or your whole account. Here are the rules, the figures behind them, and a calculator to apply them.
Trade size calculator
The amount stays the same all session: you only recalculate it when your capital changes.
Rule 1: trade only money you can afford to lose
Your trading capital is the money you set aside for trading and could lose entirely without changing your life: not savings, not money for rent or bills. Every amount below is calculated from this capital, and only from it.
Rule 2: risk the same small share on every trade
Most traders who last risk 1 to 2% of their capital per trade, and keep that amount fixed for the session. The reason is simple: losing streaks happen. Here is what is left of your capital after 10 losses in a row, depending on the share you put on each trade:
| Share per trade | Capital left after 10 losses in a row |
|---|---|
| 1% | 90.4% |
| 2% | 81.7% |
| 5% | 59.9% |
| 10% | 34.9% |
At 1 to 2%, a bad run is a setback you can recover from. At 10%, it wipes out two thirds of the account. Our article on how much to invest per trade goes into detail.
Losing streaks are normal, even when you win more than you lose
Many beginners think a run of 6 losses means their method is broken. The math says otherwise. Even with a win rate of 55%, above the break-even of a 92% payout, the chance of meeting at least one run of losses over 100 trades is high:
| Losses in a row | Chance of at least one such run in 100 trades, at a 55% win rate |
|---|---|
| 5 | 64.7% |
| 6 | 36.3% |
| 7 | 17.9% |
| 8 | 8.4% |
In other words, a run of 5 losses is more likely than not over 100 trades. Plan for it instead of being surprised by it.
Rule 3: set a daily stop
Decide before the session when you stop: for example after 3 losing trades, or after losing 5% of your capital in the day. When the limit is reached, the session is over, whatever the market does next. A daily stop protects you from the most expensive moment in trading: the urge to win back a loss right away.
Rule 4: know your break-even win rate
A win pays less than 100% of the amount, a loss costs 100%. At a 92% payout, you need to win 52.1% of your trades just to break even; at 80%, 55.6%. Money management cannot turn a losing method into a winning one: it only gives a good method the time to work. See the break-even win rate.
Rule 5: never double up after a loss
Doubling the amount after each loss (the martingale) seems to recover losses quickly. In reality, it turns a normal losing streak into the loss of the whole account. Our martingale simulator shows how fast the amounts grow.
Rule 6: write everything down and review it
Note every trade: asset, time, expiry, amount, reason, result. Once a week, look at your win rate against your break-even, your largest losing run and whether you respected your limits. Our free lesson Your journal, your best coach gives a ready-made method.
Your money management in one minute
- Set your trading capital.
- Risk 1 to 2% of it per trade, the same amount all session.
- Stop for the day after 3 losses or a 5% loss.
- Recalculate the amount only when your capital changes significantly, never after a single loss.
- Never double up to win back a loss.
- Review your journal every week.
Frequently asked questions
How much should I invest per trade in binary options?
1 to 2% of your trading capital. With $500, that is $5 to $10 per trade, whatever happened on the previous trades.
Is a losing streak a sign that my strategy does not work?
Not on its own. Even at a 55% win rate, there is about a two-in-three chance of meeting 5 losses in a row over 100 trades. Judge your method on at least 100 trades, not on a single run.
What is a daily stop?
A limit set before the session, for example 3 losing trades or a 5% loss, after which you stop trading for the day.
Can money management make me profitable?
No. It protects your capital and gives a good method the time to show its edge, but it cannot turn a win rate below your break-even into a profit.
Our free course goes further with the lesson Sizing that lets you trade for the long run. Binary options are high-risk products: you can lose all the money you invest.
