Binary Options Trading

I'm starting this journal because recently I jumped from the Forex market to binary options. Even though I'm new in the field of binaries and I just wanted to get my feet wet, I was fascinated from the beginning. They are so easy to trade with and to handle, even a total noob can manage to understand binary options in a matter of a couple of hours.

I'm gonna document my progress in this thread. I hope I become more successful with binary options than I was with Forex before. Let's see and start the ball rolling.

This is my first binary options trade. EURUSD goes down very hard and has a lot of momentum. Eventhough the price is going to hit a resistance zone soon, I think it has too much momentum right at the moment and I can go short.

By the way: I ve found a very good and reasonable resource about binary options at http://easybinaryoption.com/. I'm going to focus on the main currency pairs in the next couple of weeks before I'm gonna include additional assets in my overall plan.

I am just starting into the binary options thing myself. Im interested to see how it works out for you.

I'm curious about 'Binary Options'. They're relativity easy to trade and with 24Options you can close the FX options early.

What I'm wondering about is where does the money come from the brokers use to create
a trade?

ie: You deposit $250 USD and buy a 'CALL' for $100 on the EUR/USD. The payout is around 81%. You win and they have to deposit $181 into your account. Your bid, $100 + $81.

Where does the $81 come from? At this rate it wouldn't take long for the broker to be at a negative income. I know that you can't win every time when you carry the trade to the end.

However, what about the 'Early Close'? You can make 30%- 40% all day long by closing a trade early. The broker pays out on every trade. Where do they get the money to pay out?

I did a short experiment using 24Options early close feature and did 10 FX Binary Option trades, $100 USD, (Paper Trades) and didn't lose a trade. Using just the assumed 30% payout for an early close I did very well. It's almost like having guaranteed income.

I can't imagine the Binary Option brokers are in the game to give out money. I know the standard FX brokers are in it for the money. You place a trade and they take the opposite side. You win or lose. That's trading FX.

What am I missing in the 'Binary Options" arena? Winning all the time? that doesn't sound possible.

RT...

Most traders are loosing traders and the binary options brokerage companies obviously know that. I think they are smart enough and have done their 'job' to know that they are winning money on average.

I think ten samples is far to less for a 'case study'. If you have a 30% payout, you need to win about 8 out of 10 trades to make a small profit. That's a pretty high win rate.

Hey I have just started to trade binary options as well. Still trying to find a strategy to use to play it. Have been looking around and no one has really revealed any insight as to a profitable strategy to trade it. I was looking at the 15 minute charts and using an rsi period 6 , looking for divergence, when I see it I look for the first blue or red candle formation depending on if its bullish or bearish then I enter on the next candle. Going back in time on the charts , it seems to be not as profitable as it looks, ypu win some and you lose some, its like you would be losing everything or breaking even. You could lose your money a hell of a lot faster trading binaries than spot forex. You would need a good strategy with a high win rate to be profitable. Its possible but since this is new to me and a lot of other traders, no one has found that high win rate strat yet or arwe telling others about it in the forum. I am glad I found this thread for I was looking for others thta are interested in trading binaries. I think over all I will have better success trading it than spot forex, less to think about, but just gotta find that system that works more times than it doesn't. Maybe we could put our heads together and figure something out. I can be skyped Dappadap1 ,anyone could holla at me if they got any ideas. My name is chaun (shawn)

I agree. You need a very good success rate to make this work. If you get 85% payout like at 24Option, you need about 55% hit rate to break even. So for a reasonable profit you should aim for more than 60%.

However, I think this is possible because in contrast to the Forex market you don't need stops for money management and there is no stop hunting.

Hi guys! I myself was trading future/forex spot for a while and after a hard hit, i started trading binary options, because of the possibilities of a much smaller Capital investment.

I soon realized that you cannot trade the BO the same way you would trade anything else... simply put , the market is timed! IF you are aware of the market and understand how a broker makes it's money ( every trader need to learn that ) you're already on a good way to trade Binary options.

When I started trading BO, I approched my trades the same way as I was used to... At this point both approach are the same. Find your levels, know where the market is trending and so on.

But when it comes to entering a Put/Call, timing is key! I noticed that example: on a 15 minutes options, almost in the middle of the time span, there will be a Block Trade, that moves the market. and most of the time that move will be the impulsive move, then for the rest of the timespan, you will see correction moves. So you have to be able to get in at the Prime Time.

Personnaly, I like to wait for that Block trade before getting in. And if the setup looks right then I proceed.

Also for those who dont really understand how a broker make it's money, all I got to say is, dont follow the "traders choice" %s that your broker is giving you... if 60%call and 40%put, watch that Block trade closing the 60%that were on Call. Thats where the broker makes his money... so he's only got to pay 40% that were PUT and collect from the 60% that were CALL. most of my winning trades are against those percentages.

Im not saying that this is the absolute truth, but so far, from my own observation of how the market behave on certain time, because remember market IS TIMED, the Block Trades play sin the brokers favor, not in yours. So beware!

By the way I am not a full time trader, but I've been studying and trading for the last 4-5 years, and Im always learning ( ...the hardway$ )

I'll be more then happy to discuss in further details about trading strategies, inputs or toughts!!

On this, I wish you all the best trades!!

Hello,

you guys seem to have good experience with binary option, maybe you have the answer to my question.

Are they any binary option brokers that allow you to sell option, as traditionnal option market? I mean the right to sell calls and puts; and not only buy them.

thanks in advance.

GT

I traded with 24options and what I found out is that

1) The one minute trading is very difficult, you will get a requote just about every time becuase they lack the liquidity to get you in at your entry.

2) The clock they had went from 9:55 - 56 -55- 57, it was very strange to see that!!!!!!!!!!

3) The trade closes out with 5-10 minutes left depending on the time frame you chose then at the end with like 2-3 mins lieft the screen goes grey and you see no movement, so you might of been "In the Money" only to have the trade expire and you lost!

4) Their data feed is from Morning Star, so most MT4 platforms lag behind about 1 pip (10 5th digit). That makes it very hard to get in got.

Be careful trading Binary Options, I feel as if they are not regulated enough yet! The biggest so far is Banc De Binary, they hold a US office but it is just an address, they are located overseas!

Thanks for your remply Joel. I've only found 2 brokers allowing you to sell binary options: saxobank and ig market.

What do you and others think about the strategy to sell binary options and hedge at the strike on the spot forex?

For me the main advantage of trading forex binaries over the Forex spot market is the absence of stops. I mean you don't have stops so you don't have to worry about stop hunting during "small" liquidity times. And you don't have to worry about the volatility while NFP...

However, i haven't thought about a hedging strategy yet but it's an interesting idea for sure.

Look like binary options is easy to making money because of its high payout, no worry about stop loss and have the advantage of buying several position to hedge the "in the money". So this could minimize the risk and maximize the profit for win and lose scenarios. But i doubt how broker earn money since this is so easily.

I am not sure do i miss some information or not understand fully about how binary options' work. If someone could give me some advice, it would be nice.

I'll be following your thread. I too, am going to start trading binary options on Monday.

Very good post. So much information inside it.......Thank u.

It seems to me that the basic problem with STF (short timeframe) Binaries is that you are NOT trading against the market but by definition AGAINST the Binary Broker.
This makes the broker (as to an extent in trading with a Market Maker Fx Brokers), your only counterparty? The analogy of comparing your Options Broker with a racecourse bookmaker or a casino then becomes reality. ( The BookMaker analogy being dynamic, is the more interesting. And I dont denigrate the "BookMaker" analogy.. indeed one of the most successful Software liquidity aggregation companies in this area in the last two decades, was founded by a bookmaker. LoL.. another story!!)

In Fx, there are numerous sell-side models.
But the basic Retail Broker model is to match as much as possible, inhouse and lay-off (hedge) the balance.. in that way he earns guaranteed revenue from the Transaction Costs he charges from the matched trades side of his "Book" and uses Spread manipulation/selective execution latency/slippage / etc etc.to give himself time to "SQUARE his BOOK" against the larger Interbank market.

The "agency" Broker model makes money as a "Service" from simply aggregating and passing clients trades directly to the Interbank market.(the DMA sortof model) Essentially an aggregation and tradematching service, that allows small lot clients access to the real interbank market market. (OK BIG simplification..I know..)
OK back to the Binary Options situation.. Here it seems to me impossible for the BO Broker to balance his book dynamically EXCEPT by interfering with Execution on trades that counterbalance his "Book". I thought that maybe Fx-HFT operators might provide a that service to BO brokers but my research suggests that while its being actively researched, so far not proved viable at this stage.
No doubt Im missing something here, but please, anyone who does have an insight on the BO Broker SellSide do tell me how do you "lay-off" short term option exposure, of an unbalanced "Book"?

Result? IMHO is that 1. anyone with a good STF BO system is NOT going to get profitable paybacks from any reputable broker. And 2. BO Brokers are going to continue to use latency, slippage and unreliable execution to protect themselves against unbalanced book trades.
Like I said .. Im missing a whole heap here but be really interested in anyone who knows the SellSide issues at play here.
Happy to discuss in confidence "Off Forum" if necessary.
My Contact channels are on my Profile.

All said above are broad generalizations, so please dont snap back on something, and give me a hard time about all the real-world variations and exceptions??
Instead please try to look and find the issue Im trying to explore here?

I started trading binaries 4 days ago. After trading spot forex for several years, this approach at first, looked like a form of gambling. Call or Put at the flip of a coin with a 50-50 shot of being right or wrong. The "house" always having an edge. But after some research, I've changed that opinion somewhat. For example: If someone sits down to play blackjack, with no prior experience or plan, the house has a roughly 4% edge. But if knowledge of "Basic Strategy" is applied, the edge decreases to about 1%. In other words, "information" about the game tilts the odds more to the players favor. I found the same holds true with binaries. Currently, I have done 11 trades so far, with 9 winners, and 2 losses. Trading the minimum amount just to get my feet wet. I use a reputable broker, and a good signal service. But before entering a trade, I confirm the signal on Mt4 chart with indicators. Almost all winners have been on daily trades (4 to 24 hours). The signal service also provides short term signals for 15min to 1 hour trades, but I avoid those, unless the charts strongly confirm the signal. Never trading the 60 second trade. At the time of this post, I have 2 trades due to close in 7 hours. Both are well within the money.

My point is that with good information (good signal, and chart confirmation), this could be a successful form of trading for some people. In previous posts, it was pointed out that the broker can "tilt" the odds to their favor. But this is true of all Forex brokers, both spot and binary. Personally, I found it takes quite a bit of the stress out of trading for me, since the trade will close at a predetermined time, win or lose. And since I have a regular day job, I don't have to worry about trying to get to a computer to check the status my trades.

As time goes by, I will post specifics on how this form of trading is working out. Here are the beginning specifics:
Account balance: I started with a small account: $500
Trading 3 pairs: Eur/Jpy, Usd/Jpy, Gold.
As I am not affiliated or represent any broker or signal service, I will leave their identities out for now, unless asked.
Trades: Total - 11. With 2 pending to close.
Trade investment: $10 per trade. The return varies from $17.30 to $18.
If the trade wins, the investment amount is returned, plus the difference ( $7.30 or $8)
If the trade loses, only the investment amount is lost ($10)
Profit: Without the 2 pending trades ($20 investment total), I would have $548.56 total. If these 2 pending trades close in the money, I will have $563.16 total, for a $63.16 profit in 4 days. Keep in mind, I'm trading the minimum amount for now. Happy Trading!

The 2 open trades mentioned above did close in the money. 4 days of trading binaries yields over 12% profit.

I think Cliff hit the nail on the head here. When you start to add derivatives to the mix and genuinely see the intentions behind why one option can be contrived within another, and then another, you can start to see the mass manipulation as to why, and indeed how, options were created and thus work.

For example it is my opinion IG bank have different motives for a binary than Saxo. As you go higher up the food chain of options brokers, each party will then have different motives to suit their structure.