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About Mifune | BinaryOptions.net

SystemSystem Posts: 164 admin
edited July 2013 in General
imageAbout Mifune | BinaryOptions.net

Mifune: Hello, everyone! I write a trading blog here on binaryoptions.net under my username mifune. Although I started my binary options trading venture relatively recently (February 2011), I actually first started trading back in 1998, when I was five or six years old, over the Internet. I borrowed $500 from my dad and invested in relatively cheap stocks in higher volumes.

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Comments

  • vulpinevulpine Posts: 4
    Hi Mifune.I too have been involved in the markets for some years. Worked as a stock broker for some years (not my cup of tea). I discovered binaries last September and you were actually one of the first individuals I started following on binaryoptionsdaily. I was simply BLOWN away by the way you compounded your account into such large sums. Your profit and loss thread and your style of trading price action off of a plain Jane chart has always clicked with me, even when I didn't quite understand it fully (due to my own lack of technical knowledge). Anyways, I just want to say thanks for taking the time out of your day to show us how you trade. I follow these posts closely. My question is... what % of your capital do you trade on any one trade? Also, what % of your profit, do you roll over to your next trade? Thanks again.
  • mifunemifune Posts: 160 ✭✭
    edited July 2013
    vulpine said:

    Hi Mifune.I too have been involved in the markets for some years. Worked as a stock broker for some years (not my cup of tea). I discovered binaries last September and you were actually one of the first individuals I started following on binaryoptionsdaily. I was simply BLOWN away by the way you compounded your account into such large sums. Your profit and loss thread and your style of trading price action off of a plain Jane chart has always clicked with me, even when I didn't quite understand it fully (due to my own lack of technical knowledge). Anyways, I just want to say thanks for taking the time out of your day to show us how you trade. I follow these posts closely. My question is... what % of your capital do you trade on any one trade? Also, what % of your profit, do you roll over to your next trade? Thanks again.

    Thanks, I'm happy to hear that you enjoy the posts.

    I like to limit my risk to about 1% of whatever amount of capital I'm willing to lose. That way, I'm completely indifferent to the outcome of any one trade. When I was first starting out, I made the mistake of risking 5%-10% of my initial account balance. That, of course, was just way too much and I began getting anxious over a trade's outcome, which only compounds the problem and makes you trade even worse. Obviously I treat trading seriously, but I think of it as a game where I'm simply applying strategy. I never check my account balance, or keep tabs on how much I've won or lost for the day, or set any monetary goals. Nothing of the sorts. In binaries, I simply like to keep track of my winning percentage as a barometer for my progress, which is very relevant to one's success in binary options trading.

    Right now, I'm simply trading fixed sums of money. Compounding is no longer my goal. I only use the 1% amount as a baseline figure. The problem with sticking with a percentage or ratio-based money management strategy is that building back up after a drawdown is extremely tough. For instance, if your drawdown is 50% and you diminish your trade sizes accordingly based on X% investment size per trade, then you need to double your account just to get back to break-even. So my recommendation is to trade fixed sums of money, while keeping whatever that size may be to 1% or less of whatever amount of disposable income you can trade with.

    Compounding can be done successfully if you fully know what you're doing (you would need to objectively judge your own trading skill as best you can), but one thing I will say that as you increase your trade sizes, it's not a good idea to bring your trade sizes back down if you run into a period of drawdown because it will be EXTREMELY difficult to bring your account back up to where it was before.

    Also, from that binaryoptionsdaily thread in which I chronicled my trades, I was also spending 6-8 hours per day -- pretty much every day -- trading four or more assets at once. Therefore, I was taking a higher volume of trades and still getting around 70% ITM. My actual trading strategy has evolved a little bit and is more conservative overall than it was not even a year ago. And now, while I do occasionally spend that much time watching my chart and whatnot for binaries, I only track one currency pair, taking fewer overall trades, and just do fixed trade sizes. My primary form of trading now is in spot forex (on the higher timeframes -- mostly daily charts), so I'm really only doing binaries for my own entertainment, not to necessarily compound my account to levels never before seen. :)

    Just remember that it's extremely tough to actually make a living trading binary options or any other instrument if you don't have a ton of start-up capital. Compounding can fix that, but only if you are a really strong trader already. A lot of people were like "it's impossible to take $5 and turn it into thousands!!" If one is a beginner without the ability to apply a strategy successfully over and over again and hasn't mastered the mental aspects of trading (i.e., mainly a matter of keeping emotions out of the picture), then yes I would agree. However, when I started trading at Markets World with that $5, I was no longer a beginner, had a winning strategy going for me (which I posted about on BOD, in addition to what is now a more mature version of it that I share in my posts here on BON), never got emotional over trades, and had a compounding money management strategy in place.

    Basically my initial compounding strategy was to keep a fixed trade size throughout the trading day, and then increase my investment size in proportion to a certain percentage I had in mind on the following day. Let's say I had a 1% investment size figure to go off of, and $1,000 that I was willing to lose. Therefore, I'd invest $10 in each trade. And let's say at the end of the day, I made $50, so hypothetically on the next trading day I'd be betting $10.50 per trade. Even if I lost money, I would still bet $10.50 per trade because drawdowns are much more difficult to make up if you decrease your trade size. Then again, you don't want to vastly increase your investment size ever during a drawdown (e.g., Martingale system), as this will only lead to one eventually blowing out his or her account.

    Later on, I changed up my investment size according to the perceived probability of winning the trade. I might spread my bets 5:1 -- i.e., some bets would be five times as large as others. The largest trade sizes would be for pretty much the most perfect set-up you can think of (at least according to my way of trading the market) -- e.g., taking a call option at a confluence of support brought on by a pivot level, Fibonacci retracement line, in addition to support created from price itself in the past. My lowest trade sizes would be given to trades that were still worth taking, but lower probability than others -- e.g., taking a put option at a weak resistance level in the context of an overall downtrend.

    That strategy takes some experience in successfully trading the markets to execute properly, in my opinion. Assessing the probability of a trade working out, in general, takes some "feel" for the market that can only be gleaned through experience. Based on whatever you make of the set-up, you can then adjust your trade size accordingly. But overall, it's really a personal judgement call more than anything else.

    This last strategy is actually something I picked up from how professional blackjack players approach their profession. Based on wherever they are in their card count (positive or negative, and to what magnitude), they will adjust their bets. If they are in a very positive count, they will bet however much they allow themselves to based on their capital and risk parameters. In a highly negative count, they will bet toward the lower end of the range. Then again, they don't want to spread their bets too far (usually 5:1 provides a good balance), otherwise casino officials (e.g., dealer, pit boss) will pick up on the fact that they're a card counter and ask them to exit since they simply cannot afford to support their game over the long run. It's a strategy that can be successfully applied in trading, but you need to be very, very accurate with your trades to achieve optimal effect insofar as compounding is concerned.

    Now, my money management is very vanilla in that I do fixed trade sizes. That is honestly what I would recommend to a beginner or anyone who has a spotty record of success with regard to earning money through trading the markets.

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