Most forms of day trading require a very large investment to have any hope of realizing a return large enough to provide a living. Hedge funds are set up with hundreds of millions of dollars in funding, and in good years may return about 10% on this investment. Often times after fees and commissions and profit sharing the true return on investment to those who fund them are even lower. Why not try out one of the binary options brokers that require a $250 deposit or less.
24option – Get 1 Risk Free Trade
24option is the most trusted binary options broker. It is Cysec regulated and they accept all payment methods. They offer a demo account to all depositors.
- 89% Max Payouts
- $250 Minimum Deposit
- #1 Worldwide Broker (US not accepted)
Day Trading Accounts
As written about previously, if you want to be an individual day trader, your account will be marked as a pattern day trading account. This requires a minimum deposit of $25,000. A good day trader may return something in line with about 15%-20% per year. On $25,000, even a 20% return is only $5,000 per year, hardly enough to live on. With rates of return at these levels, it will takes years and years, leaving all earnings in the account, to be able to provide a living. One down year will also be a significant setback. An equity day trader also must devote 100% of his attention to the markets for the entire trading day. Luckily there are other less competitive niches to make money trading, such as binary options.
How To Use Binary Options To Improve Returns
With a Binary options trading account, a person can become a day trader with only a $250-$500 funding deposit. While lower amounts are possible, we do not recommend this because it becomes very difficult to place enough trades to understand if your system is working. This is one of the flaws of a small sample size, it is not reliable. A deposit of $250 to $500 is not too difficult of a financial commitment for most new traders to make.
Because binary options pay out about 80% return on a winning trade, a few wins can add up fast. However with a 100% loss of the entire trade, a few losses can add up quickly as well. Clearly with this system you will need to have more winning trades than losing trades to be profitable over time. Look at the graph on our open account page to see how each winning percentage corresponds to internal rate of return. The positive is, if you are able to follow a system where your wins outnumber your losses, the additional money adds up very quickly.
Example of a $500 Account
Proper risk management is the key to winning over the long term with any trading system. With binary options especially, you can not allow a few bad trades to destroy a large portion of your account value, because not all trades will be winning trades. If one were to deposit $500 into an account, trading with about 4%-5% of the total account value would be appropriate for each trade. This comes out to about $20-$25 per trade.
A winning trade for $25 will net the trader a $20 gain with an 80% payout. Lets say the trader can win on 3/4 trades, or around 75% of trades placed, which is sensible for a scalping strategy, though not guaranteed of course. This will net the trader a 35% return over the long haul.
Luckily, binary options have very short expiration times, with most contracts expiring in 1-5 minutes. This means that many trades can be placed in a day. We do not advise taking more trades than become available through your system of course. Let’s say that about 2 trades per hour present themselves. Over a 6.5 hour trading day, that is about 12-15 trades per day. If each trade is $25 dollars, with 15 trades per day this is $375 dollars being cycled through trades over the course of the day.
A 35% return on this money will yield a trader over $130 per day! And this is with very little risk on a per trade basis. This is the true advantage of binary options. The ability to place many short term trades each day, if the time exists for you to pay attention. If not, it will just take a little bit longer to experience the same gross returns.
Successful System Key
The key is to implement the right trading system. There are no commissions in binary options trading. It also does not matter how far into the money a trade becomes, it just needs to end in the money. The key is to create a short term scalping system with a high win rate, even if the wins are by the smallest margins, the rate of return will be the same.