Targeting Total Returns

Trading performance can be viewed on a trade-by-trade basis, but it can also be viewed from total-return perspective. This later approach is more a top-down approach and, in fact, makes a huge difference on how each trade is viewed. The bottom-up approach looks at each trade as its own self-contained opportunity. In contrast, the top-down approach views each trade as a component towards a total return per week or per month. Each trade is, metaphorically, a component in a trading factory. The question arises: What’s the production of the factory for each week or month—in terms of total return.

There are different ways to approach binary option trading from a total return perspective, and all are legitimate because they reflect the fact that traders have varying goals. Some traders seek the opportunity to put on a position for a very high return. These traders are high rollers, with large risk appetites. This kind of trader searches for binary contracts that offer the opportunity to payout a $100 on a risk of $20 (therefore delivering 5:1 returns in less than a week). In contrast, the other group of traders is looking for high-probability returns. For them, binary option contracts costing $75 and higher often are attractive. They offer less rewards, but a higher probability of success.