One of the questions that most people have is: how much should I deposit? How much should I deposit to begin trading in binary options?
Most binary options brokers work with minimum deposits of around 200 or 250 USD. Many people usually prefer to start with the lowest value for fear of losing too much, or being defrauded if the broker is not honest.
Is it normal to be afraid, but most of the problems occur because of a lack of information and lack of caution, either by choosing the wrong broker, or by trading without any kind of knowledge or training.
How much should I deposit? Precautions:
1 – The first precaution is in the choice of the broker. Never choose an unregulated broker. A brokerage firm that is regulated for example in Europe, by an entity such as the CySEC, gives us and our money protection. Therefore, the fear of being defrauded and that our money will disappear or get retained in the account does not exist.
2 – Don’t trade without having learned how. Although binary options trading is simple to understand, it’s not easy to get consistent results. You must have discipline, rules, emotional control and know one or more strategies. A training class is always the best solution.
3 – Don’t deposit more than you have. Any investment involves a certain risk. As such, we should not invest more money than we have or can lose. It’s important to have a clear notion of our financial situation so we do not invest money that we will later need to be able to pay for other things. If we risk money that we need to pay for something else, we will trade under pressure, and this pressure will eventually make trading and getting good results more difficult.
How much should I deposit?
Provided you have room in your budget, ideally it should be an amount that allows us to have leeway in the account, so that we can trade a value of between 1% and 2% in each trade.
With brokers who have a minimum trade of 5 USD/EUR or 10 USD/EUR, we should ideally start with 500 USD/EUR.
With brokers that have minimum trades of 25 USD/EUR, we should ideally start with at least 1000 USD/EUR. However, this type of broker is not the best choice for someone who is just beginning to trade. Being able to trade with lower values such as 5 or 10 USD/EUR is an advantage for beginners.
Trading with 25 USD/EUR in each trade is very high for a beginner, because the greater the value of the trade, the more pressure exists and we are more afraid of losing. Those without a lot of experience are not able to manage their emotions. Fear and pressure affect the quality of the entries and thus the results.
How much should I deposit? Example with 500 USD/EUR:
If you deposit 500 USD/EUR, you will have the advantage of being able to place 5 or at most 10 USD/EUR minimum trades, and thus use 1% to 2% of the account in the initial trade.
One of the advantages of using a low percentage of the account has to do with Risk Management. It is essential to take this factor into account. Imagine that you use the Martingale strategy and your initial trade is 10 USD/EUR. If you lose, you then place a trade of 25 USD/EUR and if you lose again you place a trade of 50 USD/EUR. If you lose the 3 trades, you have lost 85 USD/EUR, which is equivalent to 17% of the account value. Imagine this has happened two days in a row. You would lose a total of 170 USD/EUR which amounts to 34% of the initial account value. You will still have 330 USD/EUR or 66% of the initial account value to continue to trade.
Still having 2/3 of the initial value of your account after two days of losses is an advantage. You can come back on the third day with a safe trading margin.
In addition to the leeway you still have, you can trade without much pressure and without fear. Sometimes fear is our worst enemy.
How much should I deposit? Example with 250 USD/EUR:
Using the same example as above, but with a 250 USD/EUR deposit and trading 5 or 10 USD/EUR as the minimum trade, you will always trade 2% or 4% in each operation.
Using Martingale as your strategy, and placing a 10 USD/EUR trade as your first trade, if you lose you then place a trade of 25 USD/EUR, and if you lose again you place a trade of 50 USD/EUR. If you have losses on the 3 orders, you should stop trading. You will have lost 85 USD/EUR, which is equivalent to 34% of the initial account value. Imagine this has happened two days in a row. You would lose a total of 170 USD/EUR which amounts to 68% of the initial account value. You will only have 80 USD/EUR or 32% of the initial account value.
Having lost 2/3 of your initial account value in two consecutive days, it is likely that you will lose the remaining capital the next day. Why? Because you aren’t able to control your emotions. You can’t manage the pressure and the fear of knowing that each day that you lost previously, you lost more than you have in the account currently. Therefore, many people lose the remaining amount in their account. They can’t manage the pressure and the fear of losing. When we have more money in the account, we can trade more calmly which is very important when placing orders. When we have less money, the opposite happens.
How much should I deposit? Other advantages – Example
Some brokers offer some advantages when you open an account with an initial deposit of 500 USD/EUR. The broker OptionBit is one that offers advantages when you deposit 500 USD/EUR, compared with a deposit of 250 USD/EUR.
250 USD/EUR deposit:
500 USD/EUR deposit:
How much should I deposit? Conclusion
Although a deposit of 500 USD/EUR is ideal, in many cases, one doesn’t have the 500 USD/EUR and starts with 250 USD/EUR. It is better to start with less money than to use money that you need for other things.
Choosing a good broker and learning to trade are more important than the value with which we start trading.