Leverage is one of the fastest ways to make (and lose) a lot of money on the financial market. And in binary options this is no different: you can also trade leveraged in this market. However, it is possible to reduce risks and have greater chances of winning by trading leveraged, learn in this article.
The term “leverage” seduces most traders because it usually involves high and quick gains. However, in the financial market, whenever something can provide a quick gain, it can certainly provide a loss just as quickly. Remember the expression: “there is no such thing as a free lunch”.
Bear in mind, too, that the easiest way to make money in the market is through consistency, so you need to be extra careful if you want to accelerate your earnings with a broker like IQ Option.
But that doesn’t mean you should avoid trying or that it’s impossible to leverage your capital if you so wish. There are ways developed by professionals that increase your chances of being able to leverage at IQ Option with less risk and greater assertiveness.
Forms of leverage at IQ Option
First of all, it’s important to divide this article into 2 important points:
There’s IQ Option banking leverage and there’s leverage when trading CFDs.
That said, we’ll explain how leverage works in both cases and how you can use it to your advantage on IQ Option.
IQ Option Banking Leverage
This type of leverage is related to what we all want: to see our capital grow rapidly. And in order to do this, we need to trade more aggressively, either in terms of the number of trades or larger amounts.
And either of these two options, if carried out without proper study and planning, will most likely lead you to lose money.
Excessive trading can result in you making too many trades without a strategy, reducing your chances of winning, which will most likely lead to losses or even small gains compared to the effort made to achieve them.
For this reason, professional traders seek to reduce the number of trades they make, while aiming to increase their assertiveness. And trading with larger amounts can affect the trader even more, since many are not prepared to deal with larger losses.
Martingale
One of the best-known forms of leverage on IQ Option is Martingale. This practice, which comes from sports betting, generally consists of doubling the value of the trade with each loss.
This means that when you hit the next trade, in addition to the profit you make on it, you also recover the loss from the previous trade, which is why it’s a way for traders to grow their capital very quickly.
However, as we mentioned earlier, there is no such thing as a free lunch in the financial market. To understand this, just do a quick calculation with us.
Let’s assume that you usually invest $10 per trade and that this first trade was unsuccessful. To do the martingale, you would double the next trade to $20. If that trade is also a failure, the amount to be used for the next trade becomes $40 and so on.
Using Martingale properly
You may have noticed that, although unlikely, a sequence of unsuccessful trades using Martingale can exceed the amount invested in the platform, leading to a bankruptcy, something that unfortunately can happen to traders.
For this reason, Martingale should be used very carefully and in conjunction with strategies that you have a good grasp of, as a high level of assertiveness prevents a long losing streak from happening.
In addition, you should set a Martingale limit within your risk management. And, most importantly, set small percentages of your capital to use for these types of leverage on IQ Option.
Soros
You can apply the same strategy we explained above to a sequence of gains, so it has even greater power to boost your capital, since there are no losses to cover. This strategy, however, has a different name: Soros.
This form of leverage on IQ Option consists of investing the usual value of your trades + the profit from the previous losing trade. For this reason, it’s a safe form of leverage – in the event of failure, you only lose the amount of your initial investment, which is small if you manage your risks properly.
However, it can be very frustrating to see your capital growing rapidly and then, after a fourth or fifth successful trade, to make a loss and see all the profit you’ve made disappear.
For this reason, don’t be too greedy and set yourself a limit amount of Soros in order to incorporate the profits into your capital. You should also prioritize using it at times of greater market stability.
IQ Option leverage with CFDs
First, we need to understand what CFDs are. They are contracts purchased from a broker which, instead of purchasing an asset, give you the right to speculate on its price.
In other words, it is this type of mechanism that allows you to trade binary options. Leverage at IQ Option with CFDs is possible on assets such as Forex, shares, commodities and ETFs. For these, a multiplier is available, which, as the name suggests, boosts (up or down) your results.
In other words, if you use a x3 multiplier, you triple your profits and losses. Therefore, as with the IQ Option leverage methods explained earlier, you should be very careful when using it.
CFD trading works in a similar way to the assets available on stock exchanges, in that you can buy and sell a particular asset at a gain (or loss), unlike the usual binary trading model, in which you just choose whether the price will go up or down.
Take profit and stop loss
Risk management features such as take profit and stop loss are available, important tools that guarantee your profit and prevent large losses.
If you’re not familiar with them yet, here’s a summary: take profit is the setting of a profit limit on the chart, at which point the platform settles and pays out your trade. Stop loss, on the other hand, is the setting of a loss limit.
Both are essential if you want to live a long life in trading. Take profit may not make much sense at first, but you should know that it is essential to make a profit and put it in your pocket, using a strategy to define the ideal point to do so.
Stop loss is even more important, as it protects you from big losses in the event of a big swing against you, which is extremely dangerous when trading leveraged.
After reading this article, you can start leveraging with a demo account on the IQ Option platform and get to know the most interesting trading strategies.
