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Return On Investment

Perhaps the most important part of getting ready for binary options is finding the very best return on your investment. Your return on investment (ROI) is sometimes even more important than which underlying asset you end up selecting. A high ROI can offset the knowledge gap that you have concerning an asset if it is substantial. For example, if you are trading an asset with a 65 percent correct trade rate and you are getting a 70 percent ROI when you are successful, you can easily find a better ROI and start making more money with a lower correct trade rate.

The way it works is quite simple. You need to find a ROI that is high enough so that even if you are wrong a few more times per 100 trades, you are making a higher rate of return when you are right. There are binary brokers out there that offer better rates on some of the lesser traded assets in order to lure traders toward them. Finding these assets can play a vital role in increasing the amount of money you make trading binary options.

The first step that you need to take is to compare and contrast between different brokers. If you are comfortable trading U.S. stocks, look around between the major online binary options brokers, demo trade and find which one presents you with the highest ROI. There are many brokers out there and they are all competing for your business. You should always trade with the broker that gives you the most money. This might mean that you need to have an account with more than one broker as rates can often vary from day to day. If Broker ABC has a higher rate of return than Broker XYZ, you obviously want to go with ABC. However, XYZ might have a higher ROI for the same asset a few days later. Spreading your bankroll out between these different brokers will give you the most flexibility and will ultimately make your profit rate a bit higher.

Return On InvestmentThe second method is to compare assets within the same broker. This step is vital for two types of traders. First, the trader who is crunched for time needs to do this in order to make sure that they are getting the highest rate of return on their money. If you do not have enough time to skim through several different brokers, sticking with a single broker will help you out without having to go to several different brokers’ sites. The second type of trader that will want to use this technique are those individuals with a smaller bankroll. If you cannot effectively spread your money out between three or more brokers, sticking to a single broker can still be profitable for you. You need to get over the notion that you can only trade one asset however. If you are familiar with technical analysis methods for short term trading, trading a different type of asset will not be a huge stretch as the principles that govern one asset are easily translated to another.

Having a high ROI can also be accomplished via a third method. Some brokers offer rebates on unsuccessful trades—some as high as 15 percent. If you are wrong occasionally this will end up paying off for you. The best way to figure out if this will benefit you is to calculate your correct trade rate. If you are right 60 percent of the time, this means you are wrong 40 percent of the time. Figure out what your average rate of return is and then do the math to see if the 15 percent rebate will help you out here.
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Let’s look at a quick example. Assume you have a correct trade rate of 60 percent with an average return of 72 percent. If you have a 15 percent rebate on your incorrect trades, this means that 40 percent of the time, you are gaining 15 percent of your original investment back. The math for a standard trading amount of $100 over the course of 100 trades looks like this:
(60×172) + (40×15)

This gives you a return of $10,920, or a profit of $920.

If you are trading at a correct trade rate of 63 percent without a rebate, you might think that your higher correct trade rate will help you out more, but the math says something different. Assume the same 72 percent ROI. The math looks like this:
(63×172) + (32×0)

This gives you a return of $10,836, or a profit of $836. As you can see, despite your better correct trade rate, you are still not making as much money as you would with a rebate. The difference might be slight, but over a period of time this is money lost. Finding out your correct trade rate, then, is an essential part of your long term success with binary options.

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