Boosting Diversity and Profitability with Binaries
Everyone in the financial world knows that diversification is the key to minimizing your risk and growing your money safely. For most people, this means a bunch of different types of stocks, with some bonds thrown in, a little bit of cash holdings, and perhaps some developing nation related investments. This has been the standard for portfolio diversification for decades, but that doesn’t mean that it’s necessarily the best method of doing things.
For one, diversity within your holdings is only helpful if it helps you to alleviate the risk you take on. And doing this is only helpful if that’s what you are trying to do. For example, putting all of your cash in a stock that returns 20 percent in a month is better than putting the same amount of money in a fund that gives you 2 percent over the course of a year. The first gives you more money, and that’s the goal of putting your money in the markets, after all. However, the second method is much safer and has a higher chance of actually happening. Nobody can predict with accuracy that a single company will do something phenomenal like this, and the odds of them being wrong and losing money are far greater than having a monster month like the one described. So, people spread their money out because it’s easier to make money long term by doing so.
However, we are traders, and we are attempting to grow our money quickly in a short while, and this means that some risks are necessary. Perhaps piling everything into a single trade is foolish (it is), but focusing on just a few different companies, or assets in general, can still be a good idea–even if it doesn’t meet the technical definition of diversification. This has been spoken of at length in other places, but there are a number of ways to increase your safety in the markets all while boosting your returns at the same time. Focusing on high return trades, such as those found in binary options, can allow you to minimize your risk and get the most money out of every dollar you put at risk.
People often avoid binary options because they are classified as high risk trades. Yes, there is a risk involved, but that doesn’t mean that they are high risk. This is especially true if you approach them correctly. For example, putting $10,000 in a single 60 second trade when you only have a bankroll of $100,000 that you are working with is not smart. 60 second trades have a huge amount of variance, and putting 10 percent of your total capital into one trade that is of an all or nothing nature is extremely risky. Instead, if you were to put $100 into a longer trade, the return would be higher, your amount being risked would be less, and the return rate would be slightly bigger since 60 second trades tend to have much lower rates than those trades that are just a few minutes longer. The downside is that you would be able to squish fewer trades into your day.
Is this really a downside, though? It’s not, simply because the longer trades, even if you were trading for as few as 5 minutes per trade, are more predictable. You would be making fewer trades, but with a higher correct trade rate, and a better return when you are right. In the end, this should boost your profit rate dramatically. There is, of course, a place in your portfolio for the quick trade, but it is not as necessary as many traders believe, and it has dragged down the reputation of binary options as a whole because there are some that don’t have the self control to use this type of trade right. Rather than jumping headfirst into this category yourself, look at what you are knowledgeable in, and diversify with in that category and boost your profits at the same time.