Every form of investment comes with some risks, and that includes binary options trading. With regular investments, you usually buy into an asset in the hope that you can sell it later at a higher price. The risk is that the price will not rise. With binary options, you can profit whether the price goes up or down, provided you have made the right prediction. You may wonder if there is any way of reducing binary options risks, and the answer is yes.

1. Discipline

Being disciplined in your trading is one good way of reducing risk. You should have a plan for your trading, and you should stick to that plan. After a time, if your plan is not working very well, then devise a new plan. Do not start making trades outside the parameters of your plan.

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1. Remain emotionally detached

   This is often easier said than done, and it goes hand in hand with discipline. If you are doing trades with short expiry times, the chances are you are sitting in front of your screen watching prices fluctuate. It can be very tempting to stick in another trade because you think an existing trade is going to go against you.

   It is fine to do this if that is part of your investment strategy, part of the plan we mentioned above. However, if you do this as a gut response, and not as part of your standard strategy, then you are really increasing your risk.

1. Recovery trading

   As we have just mentioned, doing a trade to retrieve a losing position on another trade only works in the long term if you have planned for it. If you have a call option and you are now convinced the underlying asset will not be at the strike price at expiry time, you can make another contract on the same underlying asset. This could be call option on a lower strike price, or it could be a put option.

   This can reduce your risk, but you must keep in mind that you could lose on both contracts.

1. Do not chase losses  At the start of trading each day, you should know how much of your bank you are going to trade, and how much you are going to invest in each trade. Many people find a simple strategy that works well is to make each trade a percentage, lets say 5%, of the total bank.If your first few trades lose, you may be tempted to up the amount you invest in future trades in an attempt to recoup your losses. You might get lucky, but this strategy is actually increasing your risk, so it is best avoided. There are other more complicated ways of reducing binary options risks, but these will be beyond the grasp of beginners.