So while all the strategy posts, and articles on money management, trading psychology, brokers, trading software options, indicators, and so forth might provide the foundation to getting yourself personally set up in the trading business, the main question that everybody should be applying to themselves is, can I actually trade binary options for a living? Can I log on to my computer every weekday morning, pull up my charts, my trusted broker, and do this as my form of work for years on end without having to return to my day job ever again and retire comfortably?
It’s not an easy question to answer, as everybody’s situation is different. For one, yes, it is mathematically possible to do this for a living if you are good at it. In the binaryoptions.net forum, I posted a probability spreadsheet that you might find useful as a way of estimating how much money you can make over a given period of time given your start-up capital, in-the-money percentage, trades taken daily, percentage invested, and things of that nature.
One thing I must say is that in order to actually trade profitably to the point where you do this as your living, you’re more often than not going to need a lot of start-up capital. You can theoretically turn smaller amounts of money into larger sums, but in order to do that successfully you’re going to need to be able to a) have a very, very high ITM percentage and b) consistently take trades in higher volume.
I’ve mentioned in the past that trading in high volume is not something I can recommend, as it contributes to overtrading – i.e., taking lower quality set-ups. You can turn very small sums into large sums by trading lower volume, but this would entail very risky money management practices, basically where your trade size is equal to (or nearly equal to) the sum from your previous winning trade. For example, you deposit $200, trade that $200 with your first trade, which you win and now have an account balance of $360. You would then take that $360 and trade that with your second trade. Upon winning, you would now have $648 and trade that with your third trade, and so forth. This would allow you to continue trading in lower volume and only take the best set-ups. But the main issue with this form of money management is that once you lose – which is inevitable because everybody loses trades – you would wipe out your account completely. But I, of course, don’t recommend this strategy at all. I am a big proponent of fixed-investment money management, where a single amount of money is invested into each trade. This amount remains fixed until your profit returns and trading skill dictate that you can increase your trade size.
The truth of the matter is that trading is very difficult even if you do have a lot of start-up capital to begin with. Even if you have $50,000 in saved up capital to dedicate to trading (which isn’t all that uncommon among forex traders) and you are absolutely sure you can trade this money profitably, it’s not going to be easy getting a 100% return on an annual basis, giving you a yearly salary of $50,000.
The scary thing about the trading profession is that no salary is ever guaranteed to you. Your profit is dictated entirely and directly by your trading results. This can be pretty unnerving when your entire financial future is contingent on getting profitable trading results. And this is a huge reason why many traders will start panicking when they aren’t getting the results they want/need and end up making irrational trading and money management situations and end up wiping out altogether. It can be a very, very precarious profession for those reasons.
Here is my opinion. I believe all traders should look at trading as a means of supplementing their incomes, rather than replacing their current stream of income altogether. Nobody should make the “newbie” mistake of viewing trading as a get-rich-quick scheme that will allow them to quit their day jobs because it really isn’t that easy.
That doesn’t mean I think anyone should abandon their dream of trading for a living because it is possible, but one must be very cognizant of the advantages of having a fixed income stream in conjunction with the additional benefits that regular employment can provide (e.g., health insurance, dental coverage, company-organized retirement accounts). Even I have become receptive to the idea of having a regular income stream after college although trading full-time is my desired path. That doesn’t mean I don’t have confidence in my trading skills over the long-run because I do feel pretty good about my trading abilities at this point in time. But it’s always nice to have the security of a regular stream of income and those additional benefits from regular employment (and it can be a trading-related job) in addition to what you make from trading. I actually think it can help oneself trade better in a sense by not having to stress over day-to-day finances, because in the trading world, the reality is that you’re never guaranteed to make a dime.