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Why Binary Forex Options are better than Spot Forex

  • #301
  • Jun 29, 2009 2:11pm Jun 29, 2009 2:11pm
Quoting Dreamliner
To buy closing above 4140 if it was 2.5 you are risking 2.5 to make 100. This would be a loss today.

If the price to open a sell was 2.5, you risk 97.5 to make 2.5. This would be a profit today.

If you are selling, you make the difference from what you sold at (in your case 2.5) down to zero. So the difference between what you sold at, and zero.

If you are buying, you make the difference between what you buy at (in your case 97.5) up to 100.

Make sense?
clear now

i was thinking that it was 100 or 0.

now i am not sure if i understand the one touch too.

thanks and sorry for my horrible English.
  • #302
  • Jun 29, 2009 3:14pm Jun 29, 2009 3:14pm
Quoting billye
just curious...
what is risk/reward of 1 touch contracts?

do you make more or lose more if do a long and t/p if it touches?

or is risk divided by reward lower in 1 touch VS in spot?
I'm not sure I fully understand the question, but I'll try and reply.

If you have chosen a buy to touch x.xxxx order then there are three scenarios.

 

  1. Price touches and you get 100 - buy price x the number of contracts. So in my case
    EUR/USD to touch 14100
    +0.20 (# contracts)
    51.50     (Buy price)
    100     (Closing price)
    97.00     (Profit)
  2. Price doesn't touch the number and you lose your premium.
  3. Price doesn't touch the number but gets close enough that the latest option price is substantially higher than the one you paid. At this point if you have doubts that price will eventually hit your target then you sell the contracts back for a smaller profit but you don't have to worry about making a loss on this trade.

 

  1. Risk/Reward all depends on the price you take at the time you enter the contract. The higher the price (say 82 - 88) the better the odds - in theory - of the target being hit. The risk is high compared to the reward and I only take those sorts of trades early in the trading day on the close above type binaries, when my assessment of the charts gives me solid indication that a Support level should hold. The lower the price (say 45.5 - 51.5) the greater the chance - in this case 50/50 - that the target won't get hit. Your risk is lower but the reward is greater IF the touch is made.
  2. I have never worked on Risk:Reward in my trading. I'm used to looking at targets based on Support/Resistance and doing a mental appraisal of a trades potential viability. I haven't played the scalping game for a couple of years now so this intraday style trading is not natural at the moment.

Hope this helps somewhat. If not ask again.

  • #303
  • Jun 29, 2009 3:50pm Jun 29, 2009 3:50pm
Quoting PeterFM
[list=1][*]Price touches and you get 100 - buy price x the number of contracts. So in my case
EUR/USD to touch 14100
+0.20 (# contracts)
51.50 (Buy price)
100 (Closing price)
97.00 (Profit)
100 minus the buy price (51,50) is 48,5 profit, no?

sorry if this is a stupid question (problably is)
  • #304
  • Jun 29, 2009 4:01pm Jun 29, 2009 4:01pm
Quoting giraia_br
100 minus the buy price (51,50) is 48,5 profit, no?

sorry if this is a stupid question (problably is)
48.5 points profit X number of contracts.

So, it wasn't stupid after all was it?
  • #305
  • Jun 29, 2009 5:54pm Jun 29, 2009 5:54pm
Quoting PeterFM
48.5 points profit X number of contracts.

So, it wasn't stupid after all was it?
thanks, clear now.

so you trade more begnning of London?
  • #306
  • Jun 30, 2009 2:48am Jun 30, 2009 2:48am
I have arrived at an age where my bed is more important than my charts.

I'm not at the screen much before 08:30 - 09:00 GMT but have plenty of time to watch the action and pick my trades during the day.

IN spot FX I often hold trades for days so again early starts aren't required.
  • #307
  • Jun 30, 2009 3:31am Jun 30, 2009 3:31am
Giving this a try today..Have had an account with IG for a couple of years still do, never had any probs
Anyway bought USD/CHF to close above 1.0960 at 4.0. Bit of a long shot..?! but its only costing me £4.44..!!..try a bounce off S1

see how it goes while I learn a bit more
  • #308
  • Jun 30, 2009 4:07am Jun 30, 2009 4:07am
I'm interested as I've been looking for ways to move out of spot FX to beat CGT in the UK.

I've tried normal spread betting but never felt quite comfortable there. If you're UK-based I'd be interested in hearing in how you've arrived at a regular game plan to keep ahead.

I don't want to know the ins-and-outs of your methods but perhaps the types of general tactics that you've found the best over the long term.

I'm a one-pair trader normally (GBPJPY on spot - EURUSD on BO) so will give your trade a miss this time but I'll keep an eye on it out of interest.
  • #309
  • Jun 30, 2009 5:08am Jun 30, 2009 5:08am
Please note: These are not trade recommendations.

Image should be self-explanatory but ask if you're not sure.

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Attached Image
  • #310
  • Jun 30, 2009 5:26am Jun 30, 2009 5:26am
Quoting PeterFM
I'm interested as I've been looking for ways to move out of spot FX to beat CGT in the UK.

I've tried normal spread betting but never felt quite comfortable there. If you're UK-based I'd be interested in hearing in how you've arrived at a regular game plan to keep ahead.

I don't want to know the ins-and-outs of your methods but perhaps the types of general tactics that you've found the best over the long term.

I'm a one-pair trader normally (GBPJPY on spot - EURUSD on BO) so will give your trade a miss this time but I'll keep an eye on it out...
Hi
I normaly trade EUR/Usd 1 min charts..my first year was a disaster,but slowly i started to get t grips with this.

I still work full time, 4 days a week, but am making (last year) about 1/3 to 1/2 my yearly pay. All I do is wait for an impulse from a moving average, pullback, enter trade dont stay in too long,easy to say...!!
Anyway never tried these Binaries before so taking a day off 1 min ,enjoy the weather , and learn about them
Haven't earned enough to qualify for CGT ..hopefully when I do I will be doing this full time.
  • #311
  • Jun 30, 2009 5:27am Jun 30, 2009 5:27am
And don't forget the Factor 30 suntan lotion
  • #312
  • Jun 30, 2009 11:35am Jun 30, 2009 11:35am
Looks like I might have been better going pivot to pivot...hmm
  • #313
  • Jun 30, 2009 3:03pm Jun 30, 2009 3:03pm
3 winners out of 5 and ended up with a small profit. In case you can't see why it's simply that I vary my trade size depending on how reachable I think the strike price is.

The EUR/USD to be above 14000 (Buy @ 77.2) carried 2 lots, the rest 0.2.

At one point, when EUR was touching 1.4151 all trades were in profit.
  • #314
  • Jun 30, 2009 3:07pm Jun 30, 2009 3:07pm
you're too lucky to have 1.4000 touch missed a few pips...

Quoting PeterFM
Please note: These are not trade recommendations.

Image should be self-explanatory but ask if you're not sure.

----------
  • #315
  • Edited 3:46pm Jun 30, 2009 3:15pm | Edited 3:46pm
Quoting billye
you're too lucky to have 1.4000 touch missed a few pips...
It was EUR/USD to close above 14000 (Buy @ 77.2).

My main support line was at 1.4025, plus 1.4000 is a good round number (not that that means much if the market wants to bomb down) so seemed a reasonable trade at a reasonable level.
  • #316
  • Jun 30, 2009 6:18pm Jun 30, 2009 6:18pm
Sounds like to me Roulette without the pretty women to blow the dice.
  • #317
  • Jun 30, 2009 6:22pm Jun 30, 2009 6:22pm
Quoting Code4Capital
Sounds like to me Roulette without the pretty women to blow the dice.
I tend to disagree. With this method it is not just a roll of the dice. You use support/resistance, trend lines, average daily range, and other trading skills.

I have traded forex for 4 years and have never been as profitable as I am now using binaries. I have doubled my account twice now.
  • #318
  • Jun 30, 2009 6:26pm Jun 30, 2009 6:26pm
Quoting Code4Capital
Sounds like to me Roulette without the pretty women to blow the dice.
All trading has an element of risk. This can be just as predetermined and no less risky than spot (I haven't tried futures etc). It's not for newcomers to trading but has advantages for seasoned traders.

Anything relatively new looks strange but as it becomes more common more folk will find it suits them.

I'm doing it for UK tax reasons. Maybe if our rules over here applied to spot forex then I'd stick with that alone. But I still feel this might be right for me.

The same trade assessment is used with a shorter time scale.
  • #319
  • Jul 1, 2009 6:31am Jul 1, 2009 6:31am
Quoting Yoda_Glenn
For those who don’t know, Binary Forex Options are a type of option whereby every contract you buy pays out a $100....
1. Options and spot have different purposes for whatever your trading objective may be. It's not like one gives you an edge. The benefit of not getting stopped out is balanced by the cost of the option premium, just like a vanilla option.

2. The claim that risk/reward is better is a misunderstanding because you set your own risk:reward ratio in the spot market by deciding on a stop loss and limit

3. Unless you are dealing with a professional platform, retail platforms offering binaries will not give you fair prices. If you are willing to sacrifice some spread because you have a really big edge then I suppose this is ok.

Just offering some criticisms and words of caution. Please don't take this personally.

Kris Matthews
  • #320
  • Edited 8:16am Jul 1, 2009 7:21am | Edited 8:16am
Quoting kristdm
1. Options and spot have different purposes for whatever your trading objective may be. It's not like one gives you an edge. The benefit of not getting stopped out is balanced by the cost of the option premium, just like a vanilla option.

2. The claim that risk/reward is better is a misunderstanding because you set your own risk:reward ratio in the spot market by deciding on a stop loss and limit

3. Unless you are dealing with a professional platform, retail platforms offering binaries will not give you fair prices. If you are willing to sacrifice...

>>1. Options and spot have different purposes for whatever your trading objective may be. It's not like one gives you an edge. The benefit of not getting stopped out is balanced by the cost of the option premium, just like a vanilla option.<<

Can you further elaborate on this? Are you sure you’re talking about Binary Options? The cost to trade at Nadex is $1 per contract and $1 to settle. A Spot Forex broker charges, on average 4 pips per trade (double this for exotic pairs) and even then, the spread can vary.

>>2. The claim that risk/reward is better is a misunderstanding because you set your own risk:reward ratio in the spot market by deciding on a stop loss and limit<<

I disagree, because any seasoned trader knows that placing a tight/narrow stop loss is not a good idea. Sure, the tighter your stop loss, the greater your R:R potential, but it also means that you have a greater chance of getting stopped out. Your average Spot Forex trader has an R:R of 1:1. With Binary Options the higher your R:R, the greater your chance of success, this is not the case with Spot Forex.


>>3. Unless you are dealing with a professional platform, retail platforms offering binaries will not give you fair prices. If you are willing to sacrifice some spread because you have a really big edge then I suppose this is ok.<<

Once again, Nadex is a $1 per contract and a $1 to settle, no matter what. Once again, are you sure you are talking about Binary Forex Options?

Sorry for the large font......I'm not yelling or anything
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