Topoption, one of the best brokers on the binary options market offers options builders, of which you have certainly heard of. With this type of binary options, we can customize our level of risk-return. As you may have understood, options are financial instruments, in which the return is a counterweight to the risk. In what way? The higher the risk of the investment, the higher the return on the trade. And in this way also behaves the broker by assigning a higher percentage of return to those options on which the investment should be treated in the least aspects, even more than normally. An example is the exotic options (e.g. one touch options, interval options) where, usually, due to the greater difficulty in valuing the investment, higher returns are assigned (even 500%).
Let’s see, at this point, how to evaluate the convenience of builder options, often neglected in the world of trading.
The Opportunity To Choose How Much To Risk
So, we can decide to set a certain level of return, choosing between predetermined pairs. A pair like: 70% – 15% what does that mean? You will be entitled, in the event that the option ends up out of the money, to a refund of part of the investment equal to 15%.
However, the more we increase the level of “protection” against losses, the lower the associated return will be. That’s why you’ll feel discouraged from recommending this type of binary option a few times. But Topoption, one of the best binary options brokers, makes it attractive by allowing you to choose between profit levels with a wide degree of discretion even for those remuneration thresholds usually guaranteed only by the most profitable options.
Why can you agree to get a refund on losses that is usually only guaranteed in the event of closure at the money (break-even)? For a simple reason. Even just 5 euros saved can be reinvested to make up for losses, which are always possible in trading.
At this point, how can we tell if we should look for who offers builder options or options with loss insurance, since they are not offered by all brokers? It is necessary to cultivate some trading experience, so that you can understand on average how many times you earn and how many times you lose. It can be a criterion on which to base the convenience. Let’s explain ourselves better.
The Best Way To Earn Is To Know How To Lose
No, we’re not kidding at all! The best way to earn money is to know how to lose for some simple reasons that we will summarize as follows:
- Emotional tension is one of the biggest problems people face when they feel challenged, even if only against themselves. You can’t even turn into “war machines” because you remain and you are people, in their way imperfect. Emotionality exists. But the control of emotions, on the other hand, is not always good because we gain in rationality (let’s avoid being infected by the moods of the moment, guessing one mistake after another) and we lose in other. Each of us, perhaps, has a good instinct, inexplicable and that braking it, we get less. How to understand when to brake, when to control ourselves, when to attack the market, when to “feel” the ground?
- So, let’s monitor our trading activity over a period of time. We draw up a sort of trading “plan”, in which we try to find also useful cues for the elaboration of new strategies, on the basis of our ingenuity and our creativity (not only technical analysis of the factory!). Otherwise, it would not be explained why every now and then someone, very famous in trading, turns on a small “little light” and reveals another great truth, to which no one had ever thought before. Certainly, we must also learn the basics of the trading (use of the most known indicators, Bands of bollinger, oscillators, stochastic, Macd, moving averages…) but we never stop to observe us, to think, because observing you learn. It would say every fierce empiricist but in the trading often it works also so, exactly because the market always leaves space to unexpected that the art of the “deduction” does not always succeed in capturing, and not even stocastically speaking.
Starting from these two tips for every good trader, we give you another to evaluate the convenience of using the options builder. Let’s take a practical example:
- For a whole month, we have recorded every time we have won and every time we have lost. How can we write this down, in terms of simple probability (now we don’t care too much about complicating our lives with conditional or other probability definitions)? In the language of probability, we speak of “events”. Our two events are winning and losing trades. Respectively, we will put them to the numerator of our relationship. To the denominator we will put the total number of times we have invested (therefore, winning trades + losing trades). What do we do with it now?
- Let’s admit that a result like this has come about: we won in 60% of cases and lost in the remaining 40% (we expressed it in terms of %, as it is more intuitive).
- At this point, we say to ourselves: Well, what if I assure myself that 40%, taking as a basis of reference the winning trades, spreading it among all the winning trades, so that the partial renunciation is not excessive (so I determined, the pair risk return that I will always apply both in case of winning and in case of loss insured)? Since, the losses we assume do not occur at fixed or inferable rates, such as the law of large numbers, we do not know the time when we begin to lose, that in which we stop losing … that’s why we insure ourselves from losses indifferently and always (with the options builder). When the option expires out of the money, so, we have the opportunity to reinvest that share of our investment recovered.
This just wants to be a possible “straight” in the many alternatives we have to use the builder options that we will not find at all binary options brokers, but represent a viable alternative, depending on our trading style.