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Why Binary Forex Options are better than Spot Forex

  • #321
  • Jul 1, 2009 8:17am Jul 1, 2009 8:17am
@ Dreamliner: What time do you usually buy or sell your contracts in relation to the expiration?
Binary Options Trader
  • #322
  • Jul 1, 2009 8:22am Jul 1, 2009 8:22am
Quoting Yoda_Glenn
@ Dreamliner: What time do you usually buy or sell your contracts in relation to the expiration?
It depends. Often I will purchase them in the evening EST time, around 6:00 PM. This is shortly after they open. If the support and resistance and trend and daily average all look good, I'll purchase then. Like I did last night. I purchased at 75 with 2 contracts.

I woke up this morning and it was already up over 80% of the return, so I closed out, knowing that there was a lot of news coming out today. I will reenter at around 2:30 PM today, a half hour before expiration. On days like this I make approximately 40% of the account balance. Most days I only make between 5-10%.

So, in summary, if everything lines up acceptably I purchase at the open of the binary contracts, expecting to make 30-40%. If there is a lot of news coming out the next day I might wait until 30 minutes before expiration and just get 5%.
  • #323
  • Jul 1, 2009 8:26am Jul 1, 2009 8:26am
That's right, Yoda. I think it boils down to what suits your personal trading style. I was really never able to be successful with spot forex, and I've tried directional trading, hedging, grid trading, scalping, breakouts, and everything else that has come along. The only way I've been successful is through binaries, but I still use all the trading information I learned along the way.

In fact, because I've doubled my money twice, and am up 40% on the third attempt, and have withdrawn my initial funds, I cannot lose with this method now.

I could never do in spot fx what I am doing here, though I'm sure others can.

Quoting Yoda_Glenn
>>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.<<...
  • #324
  • Jul 1, 2009 8:44am Jul 1, 2009 8:44am
@ Dreamliner: Oh no, that wasn't my quote
Binary Options Trader
  • #325
  • Jul 1, 2009 8:46am Jul 1, 2009 8:46am
Quoting Yoda_Glenn
@ Dreamliner: Oh no, that wasn't my quote
I actually quoted the entire previous post, where you did answer, and somehow forex factory is now shortening the quotes, so that all that showed up was his quote not yours. I don't understand why they are shortening quotes like that, but I can see how it could cause problems.
  • #326
  • Jul 1, 2009 2:24pm Jul 1, 2009 2:24pm
I tried a straddle thingy prior to the US news releases, one EUR/USD to touch 14130 and the other one EUR/USD to touch 14020. I closed the latter quickly after the up-move on the EUR and then took a quick trade as it approached EUR/USD to touch 14110.

I also have a Monthly trade taken earlier today EUR/USD to touch 14500 during JUL-09 @ 51.5.

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  • #327
  • Jul 1, 2009 2:30pm Jul 1, 2009 2:30pm
dl:
isn't it that you're okey with correction type of trading?

Quoting Dreamliner
That's right, Yoda. I think it boils down to what suits your personal trading style. I was really never able to be successful with spot forex, and I've tried directional trading, hedging, grid trading, scalping, breakouts, and everything else that has come along. The only way I've been successful is through binaries, but I still use all the trading information I learned along the way.
  • #328
  • Jul 1, 2009 2:42pm Jul 1, 2009 2:42pm
Quoting billye
dl:
isn't it that you're okey with correction type of trading?
What is correction type of trading?
  • #329
  • Jul 1, 2009 2:55pm Jul 1, 2009 2:55pm
Quoting Dreamliner
What is correction type of trading?
this one?
Hedge and Correlation Strategy
  • #330
  • Jul 1, 2009 2:57pm Jul 1, 2009 2:57pm
Quoting billye
this one?
Hedge and Correlation Strategy
Oh, I see. Yes, I'm still doing that, and profitable with it, just not nearly as much as with this. Thanks for clarifying.
  • #331
  • Jul 1, 2009 3:02pm Jul 1, 2009 3:02pm
Quoting Dreamliner
I actually quoted the entire previous post, where you did answer, and somehow forex factory is now shortening the quotes, so that all that showed up was his quote not yours. I don't understand why they are shortening quotes like that, but I can see how it could cause problems.
The bits that Yoda 'quoted' weren't true quotes. He copied and pasted them so they appeared the same as the post he was responding to.

I think they're cutting down the size of quotes because some folk used to 'quote' the whole of a post irrespective of how long it was.
  • #332
  • Jul 1, 2009 3:07pm Jul 1, 2009 3:07pm
Quoting PeterFM
The bits that Yoda 'quoted' weren't true quotes. He copied and pasted them so they appeared the same as the post he was responding to.

I think they're cutting down the size of quotes because some folk used to 'quote' the whole of a post irrespective of how long it was.
Makes sense, we all have to cut back in this economy .
  • #333
  • Jul 1, 2009 3:46pm Jul 1, 2009 3:46pm
How are we going to trade NFP tomorrow?
  • #334
  • Jul 1, 2009 5:18pm Jul 1, 2009 5:18pm
it seems all you guys profit from binary... at least claims so

since broker cannot lose
so I have to conclude that there must be quite a lot of uninformed traders gambling binary options there w/o a clue... that's why you get fair prices...

is this the reality?
  • #335
  • Jul 1, 2009 5:35pm Jul 1, 2009 5:35pm
Let me tell you what happened today. I trade hourly contracts. I made a trade with less than 30 min to expiration on e/u which went up today. I sold 3 at 15 for price to close <1.4150. Price was hanging around at 1.4130 & 1.4140. Price at 1.4150 was holding good as a resistance. So there are 2 minutes left to go & the price is still at 1.4130 & all of a sudden i see this huge bullish candle take off. I couldn't believe my eyes. It went up about 70 pips in about 2 mins. Trading had closed so i couldn't do anything. The bad thing is I had already counted my money as a win. With only 2 mins left i thought it was a sure thing. So boom i lost on that contract $255. I made $100 back. So for the day i was down $155..... But good news for me. I am still way up on my acct. I was trying to find out what happened because all the news was already out. The hard thing was losing in the final 2 minutes. I could have gotten out with 5 mins left & made a profit. But i was so sure it would hold. I guess not. You never know with this. Thinking back on it i should have stayed away from shorting e/u when it was going up.
  • #336
  • Jul 1, 2009 6:52pm Jul 1, 2009 6:52pm
Quoting billye
it seems all you guys profit from binary... at least claims so
since broker cannot lose
so I have to conclude that there must be quite a lot of uninformed traders gambling binary options there w/o a clue... that's why you get fair prices...

is this the reality?
The basics of trading still apply. I'm demoing this but approaching it the same business-like way I do my live spot FX account.

When I go live I'll have learned what this all about, at least the basics of it. I've made mistakes to the point where there are $2000+ in lost profits that could be added to this account. Here's my statement after less than two weeks trading. Many of these trades were at low position sizes so didn't play the over-leverage game as I wanted a realistic idea of contract prices at the sort of account size I may start with.

There are doubtless dozens of ways to play this market and I'm still at the foot of the learning curve but with the same care and attention that I've developed over the years I think I can make this work.

I assume that if there is a price for an order and I trade at that price then they have to take the other side (whoever they are). In the same way that another party has to take the other side in FX at the retail level, I expect there are the same sort of folk in this as well.

I'm decorating my sister-in-law's bathroom over the next two days so doubt if I'll get the chance to trade. With NFP arriving tomorrow it's probably not a bad thing. I'm not yet ready with a plan for this type of release so better off out of the market.

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  • #337
  • Jul 2, 2009 6:53am Jul 2, 2009 6:53am
Hi Yoda,

I am just simply stating that options aren't the answer to people who can't trade in the first place, just because it has a better perceived R/R. In fact, R/R is difficult to compare because the benefit that you are getting (time and protection from excessive losses and not getting stoped out) is balanced out by the premium you pay. This is fundamental to all option pricing, regardless of exotic/vanilla character. Before you make a comment about seasoned traders, realize that I've been trading for several years in both spot and derivative markets and I trade on longer term macro themes and have stops of at least 200-300 pips. I do not try to navigate short term noise with tight stops

Again, the statement that a higher R/R ratio leads to more success is misleading because your profit/loss at the end is related to expectancy, which only comes with a genuine edge, not just R/R. That said, for certain edges it makes more sense to use binary options compared to spot trades or vanilla options trades. For those who are familiar with options, binary options and other exotics still have the greek parameters such as theta (time decay), etc. but their profiles are completely different so do some reading and keep these differences in mind when you are entering positions.

Regarding costs, I wasn't aware that Nadex had such low costs. That is quite impressive for what seems like a retail platform.

Thanks again for your reply Yoda.

Best wishes,

Kris Matthews

Quoting Yoda_Glenn
>>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.<<...
  • #338
  • Jul 2, 2009 7:08am Jul 2, 2009 7:08am
Ferndog, so sorry to hear this. But the lesson was probably worth it. I have learned over and over in spot fx that I can't EVER go against the trend, so that has saved me a few times here in binaries. You know that now, too, so you can plan accordingly and be a much better trader because of it. So think of it as a lesson learned and it's worth the price.

Quoting ferndog
Let me tell you what happened today. I trade hourly contracts. I made a trade with less than 30 min to expiration on e/u which went up today. I sold 3 at 15 for price to close <1.4150. Price was hanging around at 1.4130 & 1.4140. Price at 1.4150 was holding good as a resistance. So there are 2 minutes left to go & the price is still at 1.4130 & all of a sudden i see this huge bullish candle take off. I couldn't believe my eyes. It went up about 70 pips in about 2 mins. Trading had closed so i couldn't do anything. The bad thing is I had already...
  • #339
  • Jul 2, 2009 8:11am Jul 2, 2009 8:11am
Dreamliner i agree because i was thinking that i could not lose & this brought me back down to earth. I think this loss will help me because i will become more careful. Losses come with the territory & you learn from mistakes. I got burned. Time to get up from the ashes.
  • #340
  • Jul 2, 2009 10:51am Jul 2, 2009 10:51am
@kristdm: Sorry if I said anything about you not having experience trading, I don't remember writing that....but, for me, binary options are a welcome instrument from Spot Forex, for the reasons that apply. And as I stated, binary forex options are not for people who are new to Forex. You need at least one year experience trading Spot Forex before you can do binaries, imo.
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