20 sentences of advice about online trading and binary options trading in particular
1. Have trust in yourself – Do not rely one on brokers for trading advices. Same goes for analysts recommendations and tips from friends, gurus, newsletters etc.
2. Patience – Successful trading is a skill which being acquired over time. Surveys among profitable traders reveal that patience is a common role.
3. Have the right tools for the job- Decent internet connection, comfortable chair, sharp screen etc. This may sound obvious but feeling comfortable while trading is a must.
4. Set goals and find motives for trading – First question any trader should ask himself is “What do I want from the market?” The obvious answer may be “Money”. However, from my own trading experience I can assure you that a more appropriate answer would be “I want to figure out how the game works” / “I want to retire with more money” and so on.
Note: subconsciously, many people trade solely to lose money as a form of punishing themselves for things greater than they understand.
5. Focus on the ‘Now’ – Focus your effort in understanding market conditions as they are now rather than understanding the past or predicting the future.
6. Avoid hunches – The successful trader is in the market solely during market conditions he understands, rather than trading on theories and wishful thinking.
7. Record, Analyze, Improve – Keeping constant records of your trading activity in order to analyze what works and what doesn’t. By keeping a track record, you will optimize your trading strategies, and eventually your results.
8. Give trading the time it deserves – The game of trading is not suitable for the ‘get rich quick’ or lazy sort of mentality. It takes devotion and time to become a successful trader.
9. Scan the market for opportunities- Analyze as many charts as possible and filter them amongst those who interest you the most. Sometimes you’ll need to watch as many as few hundred charts before finding a suitable trade which may answer your criteria for order entry.
10. Manage expectations – Trading is a game, not war or love affair. Learn how to play rather than how to fight. Do not fall in love with the markets; develop an objective view towards it instead; e.g. – one that will increase your overall income. As a game, trading is the most rewarding game on the planet, but in order to master this game, a trader needs to stay realistic and know what to expect.
11. Have the right trading strategy – the ‘right strategy’ may vary from one trader to another based on personality and characteristics. The ‘right strategy’ is one that can be tailored based on one’s strengths while avoiding his weaknesses. The ‘right strategy’ is an individual thing.
12. Work on your mental abilities- While trading you must be in your Zen mode. If a trader is tired, unhappy or simply bored, he will be led towards irrational trading behavior. Unbalanced people rarely ever make money in the market; therefore self improvement should go hand-in-hand with strategy improvement.
13. Better short-term than long-term(?) – Based on my own experience and view of the markets, I understand that no individual can ever speculate on the long term direction of the markets. Speculating on large timeframes is a privilege given to large-pocket players such as banks and big funds. As for us, the individual traders, we receive the privilege of momentarily timeframes and quicker gains.
14. Once you have a trading technique, stick to it – Many traders fail over and over as they constantly create new trading rules along their way. This is not likely to work for simple a reason; you won’t be able to follow which trading strategy to good and which isn’t.
15. Start with a virtual account – It’s better to start trading with binary options practice account to test drive your binary options trading strategies. TradeSmarter platform offers virtual money trading for free:
Open a virtual account now
16. Start your trading journey with enough initial capital- Small portfolios don’t give you the leverage to learn, lose some and improve. If you’ll open a binary options trading account with small amounts, a small losing streak will have a substantial impact on your account and your trading psychology. Ideally, you should start will at least $5000, and then trade for $100-$300 per trade.
17. Identify in what you are good at- If you’ll find that you are good in trading the US market, then stay with the US market, until you’ll have enough capital to try new things. Trading multiple markets will get you out of focus, stick to the market that works for you best.
18. Master technical analysis- Understanding the graph behavior will expose you to many investments patterns that you will learn to recognize and base your trades on.
19. The trend is NOT your friend; perhaps only your ‘fair weather’ friend – Regardless of what they all tell you (analysts, books, gurus etc.) As you can clearly see for yourself, markets move sideways for approximately 70-80% of any given time-period. Once you accept this as a fact, you may actually have an edge in the market. Learn to apply sideway techniques (which are far easier and more profitable) and utilize them in your favor. Read the graph as it is and do not project your theories on him. Listen to his story instead of telling him yours.
20. Don’t be loyal to a specific underlying asset- Save it to your football team.
I hope that sharing my thoughts will help you avoid some of the common failures and evolve as a successful trader. The reasons I advocate for binary options are
- Having control of your position (due to shorter timeframes)
- Efficiency in terms of risk/reward
- Certainty of win/loss ratio
- Advantages during sideway markets
- Transparency of the trade
- Most importantly, the fault tolerance for bad human and trading behavior (eliminating greed, fear, inability to act etc.).
Binary trading, for unknown reasons, is currently the markets best kept secret and I encourage you to take a look.
Start trading Forex ( FX) binary digital options
When an investor would like to place a forex binary option trading he would take under consideration the following factors:
- Trade time
- Spot price
- Strike price
- Forex (FX) binary option price valuation time
- Expiration time
Comparison of binary options premium pricing among binary options firms
It’s highly recommendable that the binary options trader will choose the firm he’s working with according to several parameters, one of them is the option premium collected by the binary options brokerage. Usually there are great variation in the premiums paid as this investment product is relatively new and not liquid as more mature investment products such as CFD’s and Spread Betting.
The difference between: In the Money, At the Money, and Out of the Money
While placing an option trading, the main focus of the forex trader is on the current price of the underlying asset, in our case the real-time spot price.
The spot price that also can be referred as the currency price is called at the money strike price.
The forex trader can purchase a binary option; the strike price will be one of the following:
In The Money (ITM)
As you already know, anything in the online trading reward is based on a gauge of risk and reward.
The trader has to choice a variety of strategies and risk and reward factors in order to match the best options strategy that will match his investment style and the risk level he’s willing to take.
Risk haters usually stick to in-the-money option positions while risk lovers are more attracted to out-of-the-money option positions. In case the trader purchased in-the-money option, the option will move in correlation with the underlying asset price (in our example the forex spot price). The main advantage of trading forex options in contrast to taking a fx spot position is that investor will pay only the premimum without any other risk, on the other hand the premium of in-the-money option is much higher
At The Money (ATM)
Describe when the options strike price is equal to the spot price, This will allow the investor to take a position which is really close to the market real price without paying the high premiums of In the money position.
Out the Money (OTM)
Trading out of the money options is extremely popular, the forex investor speculates on a scenario which is far from the real market price. The investor wishes for a sharp move that will cause his position will advance according to his prediction, to his strike price or hopefully will exceed his strike price and will become an in the money position.
Option Value vs. Time factor
By taking a forex option trade, the investor always see in his mind several dimensions that related to his predicted profitability and risk. The most important factors are:
1)The time factor-how much time is lest the option to expire
2)Volatility-which implicate the risk within the option position
The option is prices according to many factors which are reflected in the premium price.
The idea behind pricing options is so find cases in which an underlying asset is underpriced or overpriced because of factors that aren’t related to the market and can be used by the investor to take advantage to use this price arbitrage to make money as the market correlation is not systematic.
The Ins and Outs of Trying Out our Binary Options Full Demo Account
TradeSmarter is glad to announce that thousands of traders and investors have taken advantage of trading on our virtual platform. Many Investors have had the opportunity to become familiar with our product and our user-friendly platform, as well as testing and improving trading strategies.
Our virtual money account operates exactly the same as a real account, enabling you to have the full binary options trading experience without risking real money. On a virtual account you can buy CALL, or buy PUT and trade the same way you would in the real account. Also you have access to your trading history, as well as all the tools and features of our trading platform.
Whilst binary options trading might sound complex it is in fact very straight forward. We offer stock options, forex options and commodity options, all an investor has to do to trade is by simply choosing a direction of an option, as simple as Above (CALL) or Below (PUT). Once the option expires if the you chose the correct direction and settled ‘in the money’ your return will be 70-75%, if settles ‘out of the money’ you get 10% of your deposit returned.
So why spend your time with demo trading accounts? Why not just jump right into it if it’s so simplistic?
Well, as with all trading there is high risk involved, arguably the pre-determined exposure to each trade reduces the risk however starting with the virtual trading is still the sensible option. Capitalize on this a virtual safe opportunity to test trading strategies and try out different options that work best for you. It’s much safer to learn when there is no real money and no risk. However it is still important to always treat your virtual account as if it is a real account, therefore when it is time to jump into the water your ready!
Are you a trading rockstar? come and show the world the trader in you- TradeSmarter.com
Resources:
Perfect your options trades for free with virtual trading by Steve Sarnoff
Short Video that explains what we do :)
Binary Options Trading Strategies
Binary options empower the investor with a flexible trading tool that can help him react to any change happening in the market. There are five type of binaries which fall under the following categories:
Binary No Touch (also called “Lock Out”)
a binary option that gives an investor a payout at expiry only if the spot rate has NOT traded at or beyond the touch-barrier before expiry. Only two outcomes are possible with this type of option:
1. the barrier is breached and the investor collects the full payout agreed upon at theoutset of the contract
2. the barrier is not breached and the investor losses most of his initial investment
If a trader predicts that an underlying asset is about to bump into a strong resistance or support level,
than the one touch option let speculate that the price won’t fall below a certain support level or alternatively, manage to break out a certain resistance level.
This options trading strategy is usually deployed according to technical analysis assumption such as: Support and Resistance level, Fibonacci analysis etc.
Binary Double No Touch (also called “Range Binary” or “Double Lock Out”)
Is a binary option that pays the investor the predetermined payout at expiry if the price of
the underlying asset does not reach or surpass one of the two predetermined barrier levels.
Only two outcomes are possible with this type of binary option:
1. The barrier is breached and the investor collects the full payout agreed upon at the outset of the contract.
2. The barrier is not breached and the trader losing most of his initial investment.
This strategy is aimed to speculate whether an underlying asset predicted to move within a predetermined price range.
In comparison to Strangle options strategy, double no touch don’t exposed to theoretical, unlimited risk of a strong price action in the money.
The risk is limited and predetermined.
Example:
Let’s say the EUR/USD is traded now at the 1.4253 price level,
If you buy a daily ‘Double no touch’ option with 1.43 as the upside barrier level and 1.4205 as the downside barrier level and by the end of the day the EUR/USD moved in a narrow range of 1.4206-1.4252 then this ‘Double
no touch’ binary option will be ‘in-the-money’ paying the full predetermined payout to the trader.
Double One Touch
If a specific underlying asset is predicted to break out a specific price level, with no certainty of which di
rection it will be that the Double one touch strategy is used.
The double one touch binary option will provide the predetermined payout if an underlying asset broke out either one of the directions.
The double one touch often used to speculate a price breakout after a price consolidation or upon economic data release such as earnings reports or macro economic data.
Example:
Let’s say the EUR/USD is traded now at the 1.4253 price level, If you buy a daily ‘Double one touch’ binary option with 1.43 as the upside barrier level and 1.4205 as the downside barrier leveland by the end of the day the EUR/USD surpassed the 1.43 level, or alternatively breached the 1.4205 level than this binary option will be ‘in-the-money’ paying the full predetermined payout to the trader.The following illustration shows a double one touch binary that surpassed the high barrier with an uptrend breakout.
One-Touch Options (also called “Lock In” or “Touch Digital”)
The one-touch binary option gives an investor a predetermined payout once the price of the underlying as
set reaches or surpasses a predetermined price level.
There are two possible outcomes for the ‘one-touch’ binary option:
1) The predetermined price level is breached, the investor receive the payout agreed.
2) The price level is not breached and the investor losses some of his investment
When an underlying asset is expected to move sharply to a specific direction based on solid assumption than the ‘one touch’ binary option shall be used. When buying a one touch binary option, the trader anticipates either a breakout with taking under consideration the breakout strength,as the one touch options trading strategy will be in the money only if it ‘touched’ the predetermined price level.
Binary options (also called “Digital Options’)
Binary options are one of the simplest and inexpensive investment products out there.
If you believe that the EUR/USD will climb above the current price (1.4253 for example), at the end of the selected duration (within 1 day for example) that a binary option is a great choice for you, offering a predetermined reward and risk.
Hedging a Forex News Risk Event Using Binary Options
In the past few days I have been writing all about how excited I am about my Forex hedging strategies using Forex binary options. If you have read my previous posts on this blog, then by now you are familiar with how to hedge a breakout of a Forex instrument using binary options. But just to recap, binary options hedging offers a better alternative to traditional stop-losses. The reason they protect you better than stop-losses is that stop-losses lose money when they are hit and a binary option hedge does not.
Its that simple, The principal behind this is that binary option hedges shift the risk from below the breakout point to above it. The most attractive feature of this risk-shift is that trader momentum works in your favor above the breakout point. Have a look at my previous posts if this is not clear.
Today I will talk about another binary option hedging strategy. This strategy is similar to the strategy we have been discussing. The only difference is that the timing of both your Forex trade and your binary option hedge will be based on a a rally following a Forex news risk event, rather than a breakout of a resistance point.
In this example, today Great Britain released an important news data, the CPI y/y. Immediately after the news release, which attested to a better than expected rise in Great Britain’s CPI, the GBPUSD rallied as expected. Just after buying a long position on the GBPUSD, I placed a binary option hedge on www.Tradesmarter.com ’s binary option trading site. As in my previous posts about hedging, this hedge was a position opposite to the Forex position that I was holding, in other words a $100 PUT GBPUSD binary option trade. What this effectively achieved was to provide me with a $70 buffer zone below the breakout point. Anywhere within that buffer zone, within a $70 loss on my long Forex position, I would have been protected against a breakout failure without losing any money. A stop-loss, on the other hand, would have resulted in losses in case it was hit after a breakout failure or a shake-out (a minor test of the breakout point).
We have been talking about trader momentum as an important element in making this strategy successful. As you can see in the image and in examples in my previous posts, as long as the breakout failure is minor, selling momentum will be minor in my hedged buffer zone, just below the breakout point. As soon as the breakout re-occurs after testing the breakout point, trader buying momentum will work in our favor by quickly providing us the gains we need to cover the cost of the binary option hedge, $85.
In short, trader momentum works in a highly correlated nature with binary option hedging. This makes binary option hedging a more successful strategy for protecting against minor breakout failures than a traditional stop-loss.
Go to trade options
Hedging breakouts of the USDCHF and AUDUSD by using forex binary options
In my previous posts I outlined and gave examples of how to use binary options trading as a vehicle to hedge Forex trading. The links to these previous posts can be found below, and they are very useful if you still find this technique confusing, or if you just want to delve deeper into the theory. But just as a reminder, one of the many ways that binary options trading can be useful is as a hedging vehicle. Rather than use a traditional stop-loss to protect against loss, I have been using binary options. The reason that binary options can be more attractive than stop-losses, is that stop-losses are risky below the breakout point, assuming that’s where you are placing them, and generate losses when they are hit.
On the other hand, using a binary option hedge, which is simply a binary option position placed to win in the opposite direction of our Forex trade, we gain better protection than with stop-loss because if our Forex trade fails than our binary options wins, thus fully hedging our Forex position and ultimately leading to zero losses if our Forex trade fails. Thus the risk is shifted from below the breakout point, in the area between the breakout point and the stop-loss, to above the breakout point, in the area between the breakout point and the cost of the binary option. Again, have a look at my previous posts if this is still confusing.
Today I used binary option hedging to protect against breakout failure of the USDCHF and AUDUSD. As you can see in the image below, these instruments were in full swing today. As usual, within the hour after breakout both instruments tested their breakout points. While placing a traditional stop-loss may succeed if placed exactly right, it is nearly impossible to guess how far below a breakout point a test may descend, often shaking us out of our position before breaking out again shortly afterwards. This is where a binary option hedge is useful. Immediately after placing my Forex trades at the breakout points, I placed $100 binary option hedges (a trade of a binary option in the opposite direction of my Forex trade) on TradeSmarter.com’s binary option trading site. As a result, I was completely covered up to $70 of losses when the breakouts were tested. Had the breakouts truly failed I would have exited with zero losses thanks to the binary option wins, rather than losing money had I used traditional stop-losses. Since the breakouts succeeded after testing the breakout points, I became profitable as soon as I made more than $85 on my Forex positions ($85 is the amount lost when the binary option fails).
The strength of this hedging strategy relies on the properties of trader momentum. Since nearly all traders use stop-losses below the breakout points, a test of the breakout point is very risky below the breakout point when more and more stops get hit and selling momentum builds. The same is true after the breakout test, when the breakout occurs again. At this point most traders are aware that the breakout did not fail and re-enter with greater momentum. This helps us quickly recoop the $85 loss of the binary option. You can see this in the image provided, as well as in my previous posts using the GBPUSD.
In conclusion, by using binary option hedging we shift the risk from below the breakout to above. This allows us to take advantage of trader momentum which works against us when using a stop-loss and works for us when using binary option hedging.
For more information on how this works see
http://tradesmarter.com/2009/06/hedging-a-breakout-of-the-gbpusd-using-binary-options-trading/
and
http://tradesmarter.com/2009/06/trading-binary-options-as-a-hedging-strategy-for-forex-trading/
Go to trade options
Hedging a Breakout of the GBP/USD Using Binary Options Trading
Today as expected, the GBPUSD ended its fantastic five day up swing (see image below, left side). The end of the swing was marked by a reversal during European market hours, shortly after 8AM GMT. The reversal was marked by a breakout at the 1.65150 resistance line. As usual the breakout was tested less than an hour later. At that point, the GBPUSD rose just above the breakout point, reaching 1.65185. This slight failure of the breakout point was enough to shake out those of us Forex traders that place a tight stop-loss just below (above in this case of a short) the breakout point.
We all know how much it stings when a very minor breakout failure denies us a huge payday. Indeed, those of you who placed a wider stop-loss raked in huge profits all the way down to 1.63555. So the question that always returns to our mind is, ‘What to do- set tight stops and get shaken out or set wide stops with greater risks?’
In my last article I explained how to resolve this risk conflict using binary options hedging (the link is provided below). Today would have been a great opportunity to use this strategy. At the same time that I shorted the GBPUSD at 1.65150, I placed a CALL binary option trade on the GBPUSD. Since the payout model at tradesmarter’s binary option trading website returns a 70% payout, this meant that my $100 CALL binary option effectively hedged my GBPUSD short trade and kept me profitable even when the breakout failed. In fact, I was hedged all the way up to 1.65250 without placing any stop-losses. As expected, the breakout failed only slightly and then brokeout again with much more momentum. My hedge cost me $85 because the success of the breakout caused my CALL binary option to fail. However it did its job since the profit on the GBPUSD was much greater, as you can see in the chart attached.
The conclusion, as you can see, is that binary option hedging can usually offer us a more successful alternative than placing traditional stop-losses. Thanks to moderate breakout tests, followed by trader momentum, we can shift our risk from below (in this case above, because its a short) the breakout point to above it (in this case below it). For a quick explanation of how this works see see http://tradesmarter.com/2009/06/trading-binary-options-as-a-hedging-strategy-for-forex-trading/ .
What are one hour Binary Options?
One hour option term came about as traders and investors worldwide strove for new, simplified ways to trade across the financial markets. One Hour Binary options are a cross between traditional buy-and-sell options and those of fixed returns. However, do not be overwhelmed by this new system; more and more financial traders are finding it the most simple, ‘straight up’ and enjoyable way to get the best out of online trading.
Trading Binaries- How does it work?
Binary options or digital options, can have only one of two possible outcomes. When trading binary options we only have to ask ourselves two questions. First, what is the current rate of currency we are analyzing? Second, can we expect the rate to be higher or lower in a fixed time from now? For example, imagine you are a trader who is willing to risk $100 on the idea that Euro/Dollar’s exchange rate will increase in one hour from now. If your prediction is correct and the fixed return rate is 70% you will receive $170. If incorrect and your binary option decreases below the strike price, you will lose your initial investment and receive nothing. The term ‘binary’ thus suited this all-or-nothing type of trading. You should now be starting to realise why binary options are fast becoming the simplest way to trade the markets and are yielding large profits for online traders. But here are a few more factors to help you:
Benefits of trading hourly binary options
1. Controlled Risk – The percentage reward is known from the outset, as is what the player stands to lose i.e the exact amount they placed.
2. Easier, simpler – The player only needs a sense of direction i.e. ‘Will the exchange rate increase/decrease in half an hour?’
3. “In the money” – For a profitable trade to take place there is a need for price to close in-the-money, a winning trade will receive the entire payoff, even if was ‘right’ by a single tick.
4. Protection – A safer option to take if a trader has an open position elsewhere in currency, stocks etc. Utilizing a binary option can eliminate a further loss elsewhere.
5. Punctuality – Binary contracts are being issued around the clock, allowing traders to trade on multiple time frames. There is always an expiration time arriving, which constantly yields new opportunities for binary traders.
Select Direction:
1. “Call Option” – Select call if you believe that the instrument will close above the current price
2. “Put Option” – Select put if you believe that the instrument will close below the current price
3. Select Investment amount
Example:
hourly option
Digital Option Calculation
The cash-or-nothing digital option provides a fixed payout of M when the price of the underlying instrument S ends up above (in the case of a “call”) or below (in the case of a “put”) the strike price K.
Binary option formula
This can be visualized as follows, with the height of the horizontal bar equivalent to the payoff M:
One hour Digital option
What are binary options (digital options)?
http://tradesmarter.com/2009/03/what-are-binary-options/
