Why Binary Forex Options are better than Spot Forex

Demo trade for a couple of weeks until you grasp the concept of it. It was a bit tricky for me to understand Binary Forex Options in the beginning, but you will grasp it.

Buy a contract if you think the price of a currency pair is going to be just one pip (or more) higher than the strike price at that contracts stated closing.

or

Sell a contract if you think the price of a currency pair is going to be just one pip lower (or more) than the strike price at that contracts stated closing.

Buy only contracts that are not too pricey on the ASK side and only sell contracts that are high priced on the BID side.

There is a trade example on the IGMarkets website where someone Risk 40 USD and gains 5000. This is a 1:125 Risk Reward Ratio.
How often does that happen? It sounds to me that they just want to get
people to belive that it's easy and you risk very little and win big.

I think it is theoretically possible of course but how realistic?

how realistic?? its probably less than 1% ...its around 0.8 % to be precise

At 1% you would still be in profit (1040 USD) if you lose that 40 USD 99 times and gain 5000 USD on that one trade.

Just checked again they risked 40 and gained 2000 USD. Still very unrealistic. Just like getting a 1:50 Risk Reward
in Spot Forex. 1:8 was my biggest.

this sounds like a parlor game to me. there are such things as options in regulated markets after all.....

Hi Yoda,
Thanks for bringing this to our attention.
I opened demo account with hedgestreet and had a good play. but i couldn't find Monthly (or weekly) One Touch option. The binary option simply says something like "3pm EUR/USD Expiry > 1.4200...". I assume that is not One Touch Option. Could you please shed some lights on it?

Thanks in advance!!

IG Markets offers the mnthly one touch i believe.

Hedgestreet offers the weekly binary option (and the Daily Binary Option) only. If you choose a currency pair and then scroll down the list of strike prices, you will see strike prices with a "W" next to them. These strike prices will also have expiration dates that expire on Friday.

Only IG Markets offers the "Monthly One Touch" Binary Option, Hedgestreet does not.



PS. Hedgestreet offers some type of Binary Option that deals with how the spread widens on a currency pair.....I know nothing about this type of Binary Option.

The options on spreads relate to the price closing between a certain price range. It looks like they range anywhere from 150 to 450 pips. It’ll be interesting to see how they’re priced because their little market is closed now.

siafx

Binary Forex sounds like Head or Tail Gambling isn't?

Honestly, it depends on your level of Spot Forex experience. If you don't have any Spot Forex experience, then yeah, it is gambling. However, if you are coming from a Spot Forex background then predicting price movement, within a given time frame, is no different than a regular Spot Forex trade.

With that said, Binary Forex trading isn't for everyone.

It's quite similar ... but different.
Hard to explain. I basicly try to use alot of Support and Resistance
along with Trend and Price Action to predict if it's going to be above
my strike price.

What price is relavant when my option expires?
I bought Germany30 to finish above 5000. It's at 4999,5/5001 at the moment. Also I don't know what open price they are reffering to.
I have the FTSE in my watchlist and the %change is blue so it gained a few points but my FTSE to close 0-30 pts up binary is almost worthless.

Sofar I like IGMarkets a little bit better because you have a solid Trading Platform with Charts and everything. Very easy to use.

@ Tjpld: Yes, IG Market's platform is definately nice, no doubt about it. And Binary Forex trading does take a slight mental adjustment from Spot Forex. There is a slight learning curve.

Ok, confession time. Seeings as someone has already raised their head above the parapet I might as well join in!

I've been fixed odds trading for a while now but have chosen not to say anything because of the inevitable ridicule and possible accusations of 'marketing' and I really didn't want to be seen as trying to wind people up who have spent years learning their craft.

To be honest I am really surprised about how few FOREX trders seem to be aware of the fixed odds market.

I spent 2 years trading 'traditional' FOREX but then I stumbled upon an internet article that introduced me to fixed odds (or binary or digital trading as it often called.) I tried it and took to it like a duck to water.

I've made more money trading fixed odds than I've ever done by traditional FOREX trading. That's not to say it's a piece of cake, it isn't, but it's definitely a lot less riskier. At the end of the day it's probably just a case of different strokes for different folks.

I was always into trading short time frames, 1 - 5 minutes so I trade whats known as 'flash bets' basically high frequency trading over a short time frame of between 2 and 4 minutes unlike the O.P who's trading 'one touch' and 'no touch' etc.

Anyway, I was making negligible returns with trading traditional FOREX as it's a leveraged product and can get quite technical always trying to figue out margins, leveridge, spreads, price per pip and what not.

Now all I do is study my chart, get into the flow of the market, keep and eye on news releases, all the stuff your average trader does. When my indicators and market conditions give me the signal, I place a trade.

I can choose how much I wish to earn if my prediction is correct, say for example I can choose to earn £10.00 if I feel the pound will rise against the dollar in the next 3 minutes. My broker will then quote me a price for the trade, usually a little over half of the total win amount e.g. £5.50 (this price will fluctuate in real time according to price movements)

So, if I win I get my £5.50 steak back plus £4.50 profit. If I'm wrong and price goes against me in the chosen time frame I lose nothing more than my initial £5.50 steak, doesn't matter if I'm out by one pip or a one hundred pips I can never lose more than my initial steak.

I guess the first thing traditional FOREX traders are going to say is that what I'm doing is 'gambling', which again is why I've kept quiet about what I do because as far as I'm concerned ALL trading be it FOREX, futures, commodities or whatever can be loosely termed as 'gambling' IMHO.

What separates trading from gambling in my opinion is the understanding of the market, the correct use and understanding of your chosen time frame and indicators and above all discipline and sound money management practices, all of which apply equally to fixed odds trading.

And the thing I like most about it is that I no loger have to deal with leverage, margins, exit strategies and best of all, no spreads, so I can now trade all those currencies that I've always wanted to but was prohibited from doing so because of the higher spread i.e. GBP/JPY, GBP/USD

I read an article the other week (sorry but I can't find the link) about how lots of city traders were using fixed odds brokers to go short on stocks when short selling was banned for a time last year as fixed odds trading does not affect the actual price of the stock/ commodity/ currency being traded unlike traditional trading.

Anyway, I'm not trying to persuade anyone to abandon traditional FOREX, just making people aware that there is another way. . . It seems to be a bit underground at the moment, but I've a feeling more and more people will be trying their hand at fixed odds trading in the coming months and years.

Hey, you never know, one day they may even create a dedicated forum for us here at Forex Factory!

Wonder how long you've been trading flash (successfully) ? they have a reputation of changing rules when you win. Your first hand experience would be highly appreciated!

Well, I've not read or heard of any horror stories about my particular broker.

I don't trade for huge amounts anyway for psychological as well as financial reasons, well, what I mean is I use a compounding money management strategy, so my trades grow and shrink according to my account size.

I'm no expert on betting odds, but I believe fixed odds brokers are similar to betting exchanges such as Betfair or the like, where they make money whether you win or lose by playing you off against another trader who's taking the opposite side of your trade, much the same as traditional FOREX I guess.

That would be true only if the broker has enough players & enough trading volume all the time. You are wise to keep your trades small. It is great fun, isn't it ?

Yeah, absolutely. I hear they're mad for it in Asia and continental Europe.

And I also hear that many city types use fixed odds trading as a way to hedge when spread betting. . .

As an options trader, some thoughts on the issue...

1. If you're making money with binaries, then by all means be a binary trader. If it works for you, then nobody can tell you wrong.

2. Betting on weekly (or daily) binaries is extremely risky. Options prices are affected by multiple factors (not existent in spot or futures), with the most important one being TIME. Time can kill a position if you've measured wrongly.

3. Most options expire worthless. To some extent, this is true most of the time for starters in this market, as frustration and time create a feeling of "what the heck, I've only paid 100 dollars for the contracts, let them burn". Firms know this and make tons of money out of this mentality.

4. A trader with multiple and simultaneous positions of 30-40-50,000 (or more) dollars could face liquidity problems when attempting to close all these positions at the same time. If your counterparty is the firm, then you depend on the liquidity of the firm to get your money the moment you need to close.

In my book, options are a great instrument. It's just the matter of capital allocation that makes all the difference in the world. And in that allocation, binaries take only a small part of the capital I have for options trading.

That is good news. i didn't hear it's that popular.
I know bit history of one of that broker's products which you might want to hear it for fun. The product is called "Intraday", which is basically like this:
"If a pair is at least 0.03% higher at xxxgmt than at xxxgmt today"

Seems the rule of that product started with one like this:
"If a pair is higher at xxxgmt than at xxxgmt today"
I heard one day some one won really big, then they added "0.03%" rule!