Your rate of return is one of the biggest influencers when it comes to your level of success when you are trading binary options. The brokers know this, but because of the fact that higher rates cut into profit margins for the brokers themselves, there are different rates offered by different brokers. Luckily, some offer better rates than others, and it’s important that you choose the ones that will reward you the most heavily based upon where you do most of your trading.
Different Assets, Different Returns
If you go through the top ten most heavily traded assets at a few of the biggest binary options brokers out there, you will see that more than half of them are currency pairs. A lot of binary traders come from the Forex marketplace, and all of the brokers know that. For this reason, most have targeted Forex traders by offering better rates on their currency pairs than they do on other assets. If you are a Forex trader making this transition, then this is definitely something to be aware of and take advantage of.
That doesn’t mean that all brokers do this, and it doesn’t mean that you can’t find a good rate when you’re trading stocks, commodities, or indices, either. If you are focusing on something in particular, you want to find the best rate possible, at a trustworthy broker, of course. If you like to focus on American stocks in addition to the normal Forex stuff that you usually do, then settling for a broker that has great rates on currencies, but horrible rates on stocks isn’t smart. Ideally, what you would like to see is a broker that has great rates on both.
If all else fails, then it can be advantageous to use two different binary brokers, but most people shouldn’t do this. This is a decision that needs to be made by each individual trader.
Know the Math
You don’t need to be a math wizard to be a profitable trader, but it doesn’t hurt. At the very least, you should understand that higher rates of return mean more money in your pocket. When you go out long term with this line of thinking, you will discover that even a single percentage point means a big difference. If a broker is offering a 76% return on an asset, while another is offering 77%, then you should go with the better rate.
If you really are curious about the math behind this, or if you need to figure out how two (or more) different asset rates affect your performance at a certain broker, you can use the 100 trade model. For this, take 100 trades of $100 each, and then figure out what your returns would be for the assets in question. Let’s say your broker offers an 81% rate on EUR/USD, and a 75 percent rate on Apple, and you want to see if that’s better or worse than if another broker offers 79% for both. With a 65% success rate, you would expect 65 profitable trades with each, and 35 wrong ones.
At the first broker, this would give you a profit number of $1,765 with EUR/USD and $1,375 with Apple, for a total of $3,140 for those 200 trades. At the second, your profit would be $1,635 for EUR/USD, and $1,635 for Apple, a total of $3,270. The second broker offers you a higher overall return, separating itself from the first, granted that you are focusing on both assets and not just EUR/USD. Clearly, the second one is better than the other. With this in mind, it’s impossible to argue against the fact that choosing the right broker based upon given rates is beneficial to your bottom line.