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Break Even Ratio for Binary Options Trading - BO104 - YouTube
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welcome to another binary options 100
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training video this is binary options
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104 break even ratio my name is Sam and
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this course is brought to you by binary
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options net dot au when we trade binary
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options there's obviously potential
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payouts and potential losses if we place
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a call up hood with the binary options
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broker and our speculation is correct
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and we win we claim a payout from the
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binary options broker which is a profit
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now the payout percentage can range
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generally from about 60 to 80 percent of
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our investment so some examples would be
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sent to 75 80 % cetera if we were to
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lose if we placed a call but price
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depreciated during the time of the
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binary option or if we placed a put and
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price went up or appreciated over the
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time of the binary option we will make a
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loss and this is usually our entire
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investment so if we place 5 dollars on
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our binary option we could potentially
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lose that whole $5 if the potential
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payout was 80% we could potentially gain
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4 dollars and receive 9 dollars back
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which would include our original 5
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dollar investment potentially losing
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100% of your investment is what creates
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one of the major risks in binary options
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trading with other forms of trading your
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investment generally appreciates or
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depreciates with price and there isn't
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this all or nothing characteristic
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so to help us minimize this risk we need
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to calculate a break even ratio and
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ensure our winning percentage is above
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that break even ratio and you understand
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more as this video goes on so what is
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break even ratio break even ratio is the
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amount of winning trades we need to
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place for our account balance to stay
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the same so if we have a $500 account
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balance with our binary options broker
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and we place 100 trades if our account
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balance is still 500 dollars after those
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100 trades we have not made a profit or
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loss our account has stayed the same and
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this is referred to as break-even so if
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our break-even percentage was 55% so if
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we made fifty five percent winning
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binary options trades we would break
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even if we were making sixty percent
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winning trades then we would make a
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profit that 5% from 55 to 60 would bring
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us into profit whereas even if we were
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winning 53 percent of the time and our
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breakeven was 55 percent we would be
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making a loss even though we're winning
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more than half the time our breakeven is
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more than half the reason being the
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potential risk outweighs the potential
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profit the first step you need to take
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in developing a binary options trading
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strategy is to calculate break even
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ratio
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you can then find a strategy or provide
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a higher percentage of winning trades
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when compared to break-even so how is
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break even ratio calculated we take our
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potential loss which is usually 100 and
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we divide that by the potential payout
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plus the potential loss and times by 100
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so if our potential loss is 100 percent
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of what we invest and our potential
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payout is 75 percent we would take 100
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the potential loss divide that by the
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potential payout and potential loss
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which is 175 and times by 100 which is
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50 7.14 percent meaning if we were right
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57 point 1 4 percent of the time when
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trading binary options we would break
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even if we were right more than 57 point
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1 4 percent we would make a profit and
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vice versa if we were right less than 50
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7 point 1 4 percent we would make a loss
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so here are some examples of break-even
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percentages you noticed the potential
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loss on these bottom two is that 95 the
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reason being in some brokers do not take
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100 percent of the investment some of
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them may only take 95 percent
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it's a potential loss of 100% of your
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investment a potential payout of 68
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percent of your investment creates a
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break-even of fifty nine point five two
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percent potential loss of 100 percent of
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potential payouts of seventy seven gives
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a break-even of fifty six point five
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potential loss of 100 against eighty two
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gives a break-even of fifty four point
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nine five and then we have two more
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calculations here for 95 percent
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potential loss so you'll notice the
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smaller the potential loss and the
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higher the potential gain or pay out the
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lower the break-even percentage should
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be meaning we have to be right in our
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trading less frequently
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