Why Binary Forex Options are better than Spot Forex | Page 30 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Nadex trading binary options, you better be losing money on that 3 replies

Multi Time Frame Analysis for Spot and Binary Options 457 replies

Rekon Xs and Market Scanner for Spot and Binary Options 442 replies

Spot Forex vs CFD Forex: Are we really trading Spot? 11 replies

show me one advantage of binary options over spot forex 16 replies

Attachments: Why Binary Forex Options are better than Spot Forex
Exit Attachments

Why Binary Forex Options are better than Spot Forex

  • #581
  • Sep 27, 2012 2:19pm Sep 27, 2012 2:19pm
Hello,
This is most key, the reward to risk ratio on Binaries is Much Much higher than Spot Forex. You can buy your typical binary option for $20 per contract (and some you can buy for $5!) This means if you win, you gain 5X your investment, or what you risked! ($20 x 5 = $100) To do this on a Spot Forex Position you would have to travel into positive territory that is five times your stop loss! This hardly ever happens because the Forex market is like a thrashing wild animal , and it's hard to tell when a turnaround is in progress. Most Spot Forex Traders more often than not only have a take profit that is around the equivalent of their stop loss. This means that a lot of Spot Forex traders are only gaining what they risk.
  • #582
  • Sep 27, 2012 2:47pm Sep 27, 2012 2:47pm
Quoting Caldwell
Hello,
This is most key, the reward to risk ratio on Binaries is Much Much higher than Spot Forex. You can buy your typical binary option for $20 per contract (and some you can buy for $5!) This means if you win, you gain 5X your investment, or what you risked! ($20 x 5 = $100) To do this on a Spot Forex Position you would have to travel into positive territory that is five times your stop loss! This hardly ever happens because the Forex market is like a thrashing wild animal , and it's hard to tell when a turnaround is in progress. Most Spot Forex...
How can you buy it for $5? How far does it have to go for you to hit your profit of $20? Can you scale up to $10k or more?
  • #583
  • Sep 27, 2012 5:44pm Sep 27, 2012 5:44pm
You'll have to do your own research on binaries. There are different kinds such as touch and no touch.
You are in a maze of twisty little passages, all alike.
  • #584
  • Sep 27, 2012 6:28pm Sep 27, 2012 6:28pm
http://www.tradesmarter.com/options/



anyone recommend this broker?
  • #585
  • Sep 27, 2012 10:16pm Sep 27, 2012 10:16pm
What are bid-ask spreads like on binary options in a regular, liquid, non-volatile market? Let's say for USDJPY or EURUSD? (pick a liquid expiry and strike)

The biggest issue I can see with these derivatives is, if the market isn't liquid or large enough (or if commissions are too high) for institutional investors to take a look, the broker can price them "unfairly" and the retail investor would have absolutely no idea... ...otoh, if the market is large enough, institutions could "police" the prices by arbitraging away any kooky prices. You almost have to depend on these arbitrageurs, if you can't price these options yourselves to verify fair value.

For example, I see that some brokers will "buy back" the binaries early - without checking, I would be pretty certain that they are discounting the time value of these options, at the detriment of the retail investors, as most wouldn't know any better, or have any other choice.
  • #586
  • Oct 26, 2012 4:16am Oct 26, 2012 4:16am
Anyone using any good binary strategys with IG markets at the moment?
  • #587
  • Nov 2, 2012 5:20pm Nov 2, 2012 5:20pm
Nadex offers the best of both worlds: Spot trading (bull spreads) and binaries.

The option to close a trade early while it is in profit is definitely a plus.

However, I have yet to trade a live account (only demo).
"GIVE ME 3 POINTS IN SPACE IN TIME AND WATCH ME CREATE MAGIC."
  • #588
  • Edited 7:36pm Nov 2, 2012 6:26pm | Edited 7:36pm
This thread is nonsense.

Binary (which is betting against a bookie) is NOT better than spot forex and cannot be compared to any form of zero sum game. Binary is effectively the same as betting in a casino as the fixed odds are always in the favour of the house, it means your guaranteed to lose in the long run. If you like this form of gambling stick with horse racing... it's more entertaining.

This post should be deleted as it's effectively advertising and misleading.
  • #589
  • Nov 2, 2012 8:36pm Nov 2, 2012 8:36pm
of course you could win 70-80% in binary options, but you can trade ONLY 1k..so in the long run binary options isn't a good thing, it's just for fun..
  • #590
  • Nov 3, 2012 3:17am Nov 3, 2012 3:17am
Quoting Paludo
of course you could win 70-80% in binary options, but you can trade ONLY 1k..so in the long run binary options isn't a good thing, it's just for fun..
Actually, Banc De Binary let's you trade 8k contracts. Should you want more than that, they have a VIP section.
  • #591
  • Nov 3, 2012 3:46am Nov 3, 2012 3:46am
There is a typo in the tittle of this thread.
Instead of:
Why Binary Forex Options are better than Spot Forex
please read
Why Binary Forex Options are worse than Spot Forex
  • #592
  • Edited 11:20am Nov 3, 2012 9:05am | Edited 11:20am
Quoting evertontrade
This thread is nonsense.

Binary (which is betting against a bookie) is NOT better than spot forex and cannot be compared to any form of zero sum game. Binary is effectively the same as betting in a casino as the fixed odds are always in the favour of the house, it means your guaranteed to lose in the long run. If you like this form of gambling stick with horse racing... it's more entertaining.

This post should be deleted as it's effectively advertising and misleading.
Just playing devils advocate here.
Correct me if Im wrong but here is my understanding of how binary options work.
At brokers such as 24option and Bank de Binary most trades typically pay 70% - 80%. For every call trade there is another trader taking the put trade (I am assuming). If this is the case, the brokers are making their money from the 20%-30% difference between your investment and potential reward.

Assuming this is correct, you are not betting against the house, you are betting against the other player taking the other side of the trade. The odds may not necessarily be stacked against you. This will depend on whether or not you have a sound trading strategy. Or should I say a very sound trading strategy!

Assuming a 75% payout, you would need a win ratio of at least 60% to be profitable. As with most things, there are definitely pros and cons to forex binary options. One advantage as I see it is that time is your stop loss. Unlike traditional spot trading you cannot get whip sawed out of a trade by a sudden spike only to have the trade continue in the predicted direction.

I am presently of the view that if one uses a very sound price action strategy and proper money management it is possible to be profitable over the long run.

To use ananalogy, based on these assumptions forex binary options would be more like poker then blackjack or roulette.

Now I will be the first to admit I am not there yet. I have not invested 1 cent of real money, only demo trading at this point. And I have made certain assumptions above which may or may not be correct.

Your feedback is greatly appreciated.
  • #593
  • Nov 3, 2012 9:40am Nov 3, 2012 9:40am
Regardless of how it's sold to pull people in, it's a synthetic market created by the bookie (they are NOT brokers) and the illusion of your trades being matched I imagine is debunked in their T&C's.

The dynamics of this type of gambling is completely different to trading and its even worse than trading with a bucket shop because the odds offered to you are predetermined by your bookie. You may as well back a horse.
  • #594
  • Nov 3, 2012 9:55am Nov 3, 2012 9:55am
Quoting evertontrade
Regardless of how it's sold to pull people in, it's a synthetic market created by the bookie (they are NOT brokers) and the illusion of your trades being matched I imagine is debunked in their T&C's.

The dynamics of this type of gambling is completely different to trading and its even worse than trading with a bucket shop because the odds offered to you are predetermined by your bookie. You may as well back a horse.

Just so I am understanding your argument, are you suggesting that the broker (or "bookie") is manipulating the price feed so that the trader loses?

Are they doing this for every trader? Those making $5 trades, as well as those making $1000 trades?

Not sure I believe that. No question there are scammy brokers ("bookies") out there.

If you are not suggesting that the more reputable binary options brokers (bookies) are manipulating the prices on their platforms, or refusing to pay out when someone requests a cash out, then how exactly are they scamming people?

Just trying to understand your argument here.
  • #595
  • Nov 3, 2012 10:46am Nov 3, 2012 10:46am
He doesn't understand how binary options are priced. All bid/ask quotes are priced at a mark up.



Quoting sergiel
Just so I am understanding your argument, are you suggesting that the broker (or "bookie") is manipulating the price feed so that the trader loses?

Are they doing this for every trader? Those making $5 trades, as well as those making $1000 trades?

Not sure I believe that. No question there are scammy brokers ("bookies") out there.

If you are not suggesting that the more reputable binary options brokers (bookies) are manipulating the prices on their platforms, or refusing to pay out when someone requests a cash out, then how exactly...
  • #596
  • Nov 3, 2012 10:50am Nov 3, 2012 10:50am
I think both of you have misunderstood my point, just do yourselves a favour and stay away from spread betting, binary and any other forms of bookie backed gambling.
  • #597
  • Nov 3, 2012 11:10am Nov 3, 2012 11:10am
Quoting akhtergroup
He doesn't understand how binary options are priced. All bid/ask quotes are priced at a mark up.
As previously stated I have not invested any real money as of yet with a binary option broker ("bookie") but from what I have seen so far when you enter a call or put trade on a Hi, Low Options trade, you are not charged a mark up or spread.

The price you enter is the price you enter. You are not charged a spread as you would be with a regular spot forex broker. So in others words unlike with spot forex you are not behind in the trade the moment you enter. At least that is my understanding, feel free to correct me if I am wrong about that.

The broker ("bookie") earns their commission from the 20% - 30% difference in risk vs. reward.

Am I misunderstanding what you mean by mark up? I have only been looking at HI Low trading at 24Option or Bank De Binary, so perhaps we are talking apples and oranges here.
  • #598
  • Nov 3, 2012 12:23pm Nov 3, 2012 12:23pm
Every market is a bid/ask spread. If you buy the option, you pay the asking price for the option, if you sell, you are getting the bid price. Whether you do this on nadex, or intrade, there's always a spread;

http://www.intrade.com/v4/markets/co...tractId=743474


Current best (lowest) price to buy shares is $6.66 / share.

Current best (highest) price to sell shares is $6.65 / share.

The spread here is 1 tick. The best bid is 6.65 and the best offer is 6.66.


Yes, you are misunderstanding the term mark-up. If I thought the obama binary was worth $4, do you think I would buy it for more than $4 or less than $4? or at $4?


Answer: less than $4


The 'bookie' makes money off the spread. See my post here: http://www.forexfactory.com/showthre...26#post6137426


Quoting sergiel
As previously stated I have not invested any real money as of yet with a binary option broker ("bookie") but from what I have seen so far when you enter a call or put trade on a Hi, Low Options trade, you are not charged a mark up or spread.

The price you enter is the price you enter. You are not charged a spread as you would be with a regular spot forex broker. So in others words unlike with spot forex you are not behind in the trade the moment you enter. At least that is my understanding, feel free to correct me if I am wrong about that.

The...
  • #599
  • Nov 3, 2012 12:28pm Nov 3, 2012 12:28pm
Quoting evertontrade
I think both of you have misunderstood my point, just do yourselves a favour and stay away from spread betting, binary and any other forms of bookie backed gambling.

When you think about it like that, all trading is bookie backed gambling. Atleast with binaries and options you know what your dollar risk is up-front; but I guess knowing is a gamble and not knowing is not?
  • #600
  • Edited 3:24pm Nov 3, 2012 1:04pm | Edited 3:24pm
Quoting akhtergroup
Every market is a bid/ask spread. If you buy the option, you pay the asking price for the option, if you sell, you are getting the bid price. Whether you do this on nadex, or intrade, there's always a spread;

http://www.intrade.com/v4/markets/co...tractId=743474


Current best (lowest) price to buy shares is $6.66 / share.

Current best (highest) price to sell shares is $6.65 / share.

The spread here is 1 tick. The best bid is 6.65 and the best offer is 6.66.


Yes, you are misunderstanding the term mark-up. If...
Quoting evertontrade
This thread is nonsense.

Binary (which is betting against a bookie) is NOT better than spot forex and cannot be compared to any form of zero sum game. Binary is effectively the same as betting in a casino as the fixed odds are always in the favour of the house, it means your guaranteed to lose in the long run. If you like this form of gambling stick with horse racing... it's more entertaining.

This post should be deleted as it's effectively advertising and misleading.

Akhtergroup I am not necessarily disagreeing with what you are saying, but what you are describing is not translating on to the 24Option and Bank de Binary platform from what I have seen.

When you enter a Hi Low call or put option on GbpJpy for example you are at breakeven the instant you enter the trade. You are not out of the money by 7 pips, or even 1 pip. If price moves in your favour by 0.1 pips after you enter the trade you are "in the money".

How do you explain this?

Once again you have referred to Nadex in your post and they do not offer the Hi Low Forex Binary Option as far as I am aware. I am referring to the Hi Low Forex Binary Option trades offered by brokers such as 24Option and Bank De Binary. I think we are talking apples and oranges here.
0 traders viewing now