Should You Make Regular Deposits in a Binary Options Account?
I was reading the news today only to find out that there is a possibility our banks here in Sweden will introduce negative, yes negative, interest rates! “Sweden’s central bank has cut its key interest rate from 0% to a record low of -0.1%” – BBC news. With that in mind I was thinking to myself, good thing the binary options payouts are far from negative and that I can save and invest my money there. These thoughts led to many others so I decided I would share them with you fellow traders. In this article I want to discuss why you may, or may not, want to treat your binary options account like a savings bank. The question at hand is, “Is it a good idea to make repeated deposits and treat your account like it was your personal piggy bank?” If it is then the next logical question would be “What is the best approach, and what might you need to be aware of?”
Why Would You Want To Make Regular Deposits?
For this article I will assume that you have already found and tested a reliable broker. Having said that, let me make a reality check. You are not likely to make millions of dollars very fast with a small investment. If you have been through our school you already know that making the minimum deposit possible is not always a good choice, simply because of risk management. Trust me, you will blow a 250$ account faster than you can Google Lamborghini making trades of $50(20%) or more. And let’s be honest, how fun and profitable is it to trade a small account? I understand that not everyone can deposit 3, 4 or 5000 just like that but we all need to start somewhere, which is one reason why it is a good idea to make small but regular deposits to your binary options account. Small and regular deposits, along with smart trading, can work together to increase your balance to the point your regular wins are sufficient to cover your lifestyle. It could take some time but will be worth your while, big time! I asked a friend of mine what he thought about this and this is what he had to say. . .
“Trading is already difficult and waiting for accurate trading signals can take hours, even if you are trading short expiries. I mean, it isn’t worth all the trouble if you just make a few dollars here and there. But what if you could make yourself a nice $100 on just one single trade without risking more than 3-4% of your total account balance? A few extra hundred bucks per week won’t buy you a sports car but will increase your living standards for sure! What I am saying is that it isn’t worth putting all your money in a bank account or stashing them under your pillow when you can put some of that money to work in your trading account.”
Already Making Regular Deposits? Beware of Bonuses!
Bonuses are always a touchy subject among traders. On the one hand they can help increase your trading limit, exactly like a margin account, but at the same time can tie up your funds in a never ending spiral of trading conditions. The most important thing is to be aware of the terms for your broker before you start making regular deposits. In case you have already accepted a bonus on your first deposit you absolutely need to double check, heck triple check the terms and conditions! Some brokers will increase your required turnover dramatically if you make higher additional deposits due to the fact that it becomes easier for you to reach the necessary turnover with a new higher balance. This is not necessarily a problem since you probably have a long term agenda to begin with, ie you are planning on making more deposits and not withdrawals. Not all brokers will give you a hard time like this but you need to be certain about it before you proceed, stay cautious! The real problem comes into play when you accept an additional bonus, either on your existing balance or on a new deposit. This can compound your trading requirements considerably. Lets say you have a requirement of $20,000 already, make another deposit and get another bonus with another $20,000. You will have to clear both requirements before any withdrawals are made.
Create a Buffer Zone!
Now that you understand that a bigger account equals to bigger earnings, and that bonuses can bog you down, it’s time we take a look at a deposit strategy. In my experience, the method here varies depending on your countries currency. Some of us traders live in countries with currencies that are not accepted by the brokers. Therefore, we need to be careful about exchange rates and exchange fees. Always monitor the exchange rates and make deposits when your currency is stronger against the USD or the EUR – or whichever the base currency you have chosen for your deposits. It is also to your advantage to request for withdrawals when your account currency is much stronger than your countries currency. Most brokers allow Moneybookers which will speed up the withdrawal process.
I suggest you use the Moneybookers (Skrill, PayPal or other eWallet) as a buffer zone for your money, no matter what currency you use. I call it that because you can keep making small deposits there and then transfer them to your broker whenever you want. You can also use it to withdraw earnings because it is the fastest method. However, there are fees so make sure you look them up and compare them to other deposit/withdrawal methods. You also need to remember that by making small deposits you may be limiting your ability to withdraw larger sums, another reason why an eWallet is the way to go.
If I Make Regular Deposits, How Much Should I Put In?
If you decide that making regular deposits is for you you will have to decide how much to put in. Regardless of your decision there are a few things you should never do. You should never deposit your rent or grocery money in your binary options account. You should never put your kids college money in a binary options account and you should never put your life savings in the account either. Binary options are a way to make some extra money, but it is extra fun money. Binary options are not a reliable form of investment and should never be used as such. The risk to your capital is just too great. You should only ever use your “extra” money, your fun money or your entertainment money.
Conclusion – Bank it Up!
Is it a good idea to make repeated deposits to a binary options broker? The answer depends on your circumstances but in times like these when you basically need to pay the banks to keep your money it is a smart idea to have a plan B. Instead of suffering from negative or next to zero interest rates you might consider funding your binary options account once in a while! Don’t get me wrong, I am not implying you should put all your life savings with a binary broker… I’m just saying that if you want to make money you need to invest money and binary trading is one way to do it! Set up a goal for yourself about how much you must save every week or month to reach a certain balance and deposit accordingly. Never use money you can’t afford to lose and be patient, trade wisely, make small deposits and you will be able to build your account to a size that will take care of you. Along the way be wary of bonuses and keep track of all your deposits, requirements and winnings!