The following lesson will explain the different win rates required to break-even in binary options based on the size of the payout size and trade type. The win rate a trader needs to have will be different depending on the type of binary options that is traded. Each broker could have a different name for this type of option but the underlying premise is that you are speculating on whether a security such as a currency will be above or below the market at the time of the transaction.

What Win-Rate do you Need to Break-Even? | husoxupowoj.web.fc2.com - Trading School, Brokers and Offers

With this type of option, a trader will need to win more than they lose to become profitable over the long term. Obviously winning before losing is helpful as a trader could easily lose their all the capital they are willing to speculate on binary options if they lose initially.

Option (finance) - Wikipedia

Also for this example the trader will make trades, 56 winners and 44 losers. The payout would be as follows: Any difference in the payout will require a change to the calculation.

The reason a broker can offer this type of option is that the probability of the currency or security reaching the barrier level that needs to be touched is very low. The key in understanding the different options is that the statistical likelihood of winning with a one touch trade is a lot lower than the chance of winning using an above or below option.

The break even ratio with binary options

Short term options such as the 60 second and 30 second options have the lowest payout profile and therefore require the largest win rate to generate a successful trading strategy. One of the keys to being successful when trading binary options is to understand the win rate needed on each type of binary options which will allow you to generate a profit.

Creating a strategy that will take advantage of these constraints will be the key to successful binary options trading. For more information on binary options, go to our binary options lessons here.

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