When you settle on a particular type of binary option and asset to trade on you should work out what % of your trades you need to win to break even. This is called your required win rate. This will give you a benchmark to track your performance against and tell you whether long term profit is possible.
The required win rate all comes down to the payout % on the option you have decided to trade. The calculation is
Stake ÷ (Stake + profit) * 100 = required win % to break even.
For example let’s say you want to stake 100 m฿ per option with a 70% payout. 70% of 100 m฿ is 70 m฿ profit.
100 ÷ (100 + 70) * 100 = 58.28%
So for 70% payout options you need to win 58.28% of your trades to break even. Let’s see how much this changes if we get a nice high payout % of 85%. In this example we will invest 500 m฿ per option.
500 ÷ (500 + 425) * 100 = 54.05%
With the higher payout rate we only need to win 54.05% of our options to break even.
What ABC do you need to win XYZ
Let’s say you have a profit target and you want to work out, to reach that target you need
- To trade how many options.
- What required win rate.
- How much to invest per option.
To work out 1 of those 3 things you need to know the other 2. In all examples let’s say you want to make 1000 m฿ trading an option that has an 80% payout.
You decide to invest 100 m฿ per option and you have a 60% win rate. You want to know how many options you have to trade to win 1000 m฿.
If your trade wins you win 80 m฿.
if your trade loses you lose 100 m฿ .
For every 100 options you trade, you win 60 and lose 40.
60 * 80 m฿ = 4800 m฿ 40 * 100 m฿ = 4000 m฿
So overall in 100 trades you are winning
4800 m฿ – 4000 m฿ = 800 m฿ 800 m฿ per 100 trades = 8 m฿ per trade
You want to win 1000 m฿.
1000 m฿ ÷ 8 m฿ = 125
therefore you need to trade 125 options to win 1000 m฿ .
You decide to trade 500 options for 50 m฿ each. You want to know what win rate you need to make 1000 m฿ .
1000 m฿ ÷ 500 = 2
therefore you need to win 2 m฿ per trade.
If your trade wins you win 40 m฿.
if your trade loses you lose 50 m฿.
289 winning trades * 40 m฿ = 11560 m฿ 211 losing trades * -50 m฿ = -10550 m฿ 11560 m฿ – 10550 m฿ = 1010 m฿ 289 ÷ 500 * 100 = 57.8% win rate.
Therefore you need a win rate of 57.8% to win 1000 m฿.
You decide to trade 300 options and you know you have a 63% win rate. You want to know how much you have to invest per option to win 1000 m฿.
1000 m฿ ÷ 300 + 3.33
therefor you need to win 3.33 m฿ per trade.
With a 63% win rate you know you will win 189 trades and lose 111. That is 78 more wins than loses. Making trades of 25 m฿ will win 20 m฿ if you win and lose 25 m฿ if you lose.
you win 189 * 20 m฿ = 3780 m฿ you lose 111 * -25 m฿ = 2775 m฿ 3780 m฿ – 2775 m฿ = 1005 m฿
Therefore you need invest 25 m฿ per option to win 1000 m฿.