How much should you invest with a binary options broker? It depends on your situation and trading level, find out what you should know to make an informed decision.
For most traders, the first deposit is the “scariest” one – but why? The answer to this question lies among all the complaints against the many binary options brokers we’ve witnessed. That’s not all, trading itself is risky, even with a good broker. These risks are the reason why “how much should I deposit?” has become such a popular and repeatedly asked question. We’ve examined this topic several times here on BOTS and there is still a lot to be said on the subject. For the purpose of this article let’s assume you have just found a nice broker and are wondering yourself “how much is safe to deposit?”
How Much Can You Afford to Lose?
Today, you can open your first binary options account with as little as 100-250$. If you lose it all, you’ve only lost a couple hundred. Sure, it might sound safe to make a low deposit but think about it though, you are not trading to lose money but to make money. If you can’t afford to lose your investment then maybe you should focus on paying your bills first. So make sure to only deposit your extra cash – not your life savings. Binary options are no way to try and pay a bill you are behind on. Trying to win the grocery money by betting the rent is a sure way to end poorer. To find out more about what to expect if you deposit your entire paycheck with a broker, read this article: Deposit Minimum, Come Collect Your $100k’s in 24 Years!
Does Size Really Matter?
Perhaps you are asking yourself; “if the returns are so high, does it really matter how big my deposit is?” Well, yes it does! A small deposit doesn’t leave room for many mistakes, less if your minimum investment per trade is too high. Risking only 1% of your account is safer but with a low deposit you might find it frustrating when your trades are only returning $1.85. What can be even more frustrating is of course blowing your balance because you risked too much of your total deposit on one trade. Obviously, if you just want to test the broker, you don’t need to make a huge investment. Just deposit as little as possible to test them first! As soon as you are sure they are okay you can proceed with depositing a bigger sum but don’t trade without a reliable and easy to use strategy. Just how much will your account size affect your trading? Will 200 dollars make you millions? Our article, Binary Options Small Deposits – Does Size Really Matters?, details some pros and cons of making a small deposit versus a large one.
Deposit Size And Risk Tolerance?
Once you’ve confirmed the broker is OK and your training is completed, it’s time to begin trading. One of the first things to do is assess your risk tolerance and how much you are willing to lose. Some think that risk is the size of your account but does starting with the minimum initial deposit mean you aren’t taking a big risk? Well, this answer really depends on your money-management and the minimum allowed investment with the broker. Let me demonstrate with an example:
А. Minimum Deposit 1000$ – Minimum Investment/Trade 50$
B. Minimum Deposit 200$ – Minimum Investment/Trade 20$
In the example above, which account type is taking the biggest risk? Obviously the trader with the smaller account is taking a huge risk. The 200$ account can only take 10 losses in a row (20$) before it’s completely wiped out! That’s a 10% risk profile. The 1000$ account on the other hand, even though the min trade is 250% bigger(!), can withstand 20 losing trades (20×50$) for a risk profile of 5%, much lower. This means that account B needs at least 2,000$ to match A’s profile and withstand 20 losses. What we learn from this example is that we need to take into consideration the minimum investment amount as well as the minimum deposit before funding an account. I suggest you read this article; Minimum Deposit Means Minimum Risk? Ask the Geek.
Risk Less – Earn More!
I want to make sure that you’ve come to the same conclusion as I on how much should you really deposit? It all comes down to two things; how much the minimum investment amount is and how much you can actually afford to lose. Trading is risky and we want leverage but with leverage comes risk. Being able to withstand many losses means you’ll have a chance to learn from your many mistakes and losing trades, and trust me there will be mistakes and losing trades. You make millions very fast with only 200 dollars but with the right risk management it can be done. All you need is the right education, lots of patience and disciplined trading to reach success in this business. Remember though, that no matter how large you decide to go to test the broker with a small deposit before you make a big deposit! Sometimes being the Nice Guy pays off, sometimes it doesn’t. Check out this article to see how being Mr. Nice guy can affect your account.
Go Crazy – Trade Like a Shark
No need to say no more… Just go through this article if you want to swim with sharks. Enjoy!
Bottom Line – Staff Recommendation
Important: Match your education level with the risk you can take.
Primary School Level
Minimum Deposit, no former Trading Education: $200 – $250
Average Deposit, no former trading education: $250-$400
Average Deposit, some trading education: $400-$800
Going Higher, some trading education: $800-$1500
Deep Water, very good trading education: $2500 – $10,000
Feels like a shark, very good trading education: $10,000-$30,000
Our Staff do NOT recommend to invest more than $20k-$30k for first deposit, no matter what education in trading an individual posses.