Taking profits when trading binary options is just as important as monitoring the risk on trades. Here are two examples from this morning using the German 30 and USDJPY binary options. Remember the binary options allow you to limit your risk on entry. However, the other part of your job as a trader is to take profits.
Taking Profits When Trading Binary Options
First is the Germany 30 binary option trade. Earlier a short had been taken with a wide bar in the trader’s favor. The risk on this trade was $25.50 and profit was locked in at $64.75.
Anticipating a retracement of the wide bar, a long position was entered with a risk of $21 using the daily binary. The trade was closed with profits when the Pivot line was reached.
The pivot line is generally an area that will cause price to retrace so locking in profits was the best option.
Additionally, a long position on the USDJPY was also entered. The risk on the trade was $27.75. Price moved up as anticipated and taking profits when trading binary options resulted in a profit of $30.25.
Although price continued to move up on the USDJPY and it expired in the money, I opted to lock in profits early because, after a significant move in my direction, a continued move in my direction may not happen. Instead, I had the option to lock-in the profits that were offered at that moment.
Although I generally try to capture at least double my risk on a trade, this has been a tough trading week with the markets moving very slowly, if at all. Either price moves significantly in my favor (as with the first DAX trade) or I am taking profits after I have recouped at least what my initial risk was.
The trades this morning and their risk and reward were:
- German 30 Short
- Risk $25.50
- Reward $64.75
- Germany 30 Long
- Risk $21
- Reward $24.75
- USDJPY Long
- Risk $27.75
- Reward $30.25
Total Risk on all three trades: $74.25
Total Reward on all three trades: $119.75
Risk to Reward Ratio for morning: $1 to $1.61
These trades show the importance of taking profits when trading binary options.