One of the fundamental rules of investing is diversification. The purpose of it is to spread the risk among a basket of instruments, so you won’t be exposed to a single trade. Does that apply to binary options as well? Sure it does. Binary options do not represent an exception, so we’ve assembled this material in order to give some useful tips in order to get a little diverse when trading binary options.
Tip #1 Trade different asset classes
We all start with something, whether is forex or stocks, but as you begin to get used to those assets, you need to move on and trade others as well. Now that all binary options brokers have included hundreds of instruments on their list, your options have increased. See what’s popular among stocks, currencies, commodities, cryptocurrencies, precious metals etc, and make yourself a list of 10-15 instruments you could stick to. By putting your money in different situations, you will avoid being trapped in a single bad move.
Some binary options will turn out to be negative, but that does not mean all will be that way. Diversification helps you get through those bad periods.
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Tip #2 Keep your account exposure below 30%
This could be a bad news for those of you that do not afford to invest a few thousand dollars in their trading account, but this rule can definitely help you reduce the downside of your account. Don’t place too many binary options at a time. Especially if you are a beginner, more than 5 could give you headaches. You already have a winning strategy and you can implement it flawlessly, fine, do it, but until you do too, be more cautious and keep the number of binary options limited. You want to avoid overtrading and invest your money just in those situations that have a high rate of success. The level of profitability will be reduced if you keep exposure as we mentioned, but over time the results will add up.
With that being said, these are two of the most important tips for diversification you should take into account. Make sure you find a way to implement them in your trading regime.