The Ultimate Trading Edge

I start this thread, because the last few days I read in other threads that we can't have an edge in trading, options are casino, etc.
The truth about all this is that most of the traders share the same thinking and eventually they lose money. Financial markets are a zero sum game (in its most generic meaning).
For someone to win, another one must lose. This is absolutely true but to care about it, you must be a hedge fund manager. However, if you are an individual trader I don't think that should bother you that much.
Let me tell you this loud and clear - WE (small individual traders) HAVE THE ULTIMATE TRADING EDGE.
That's right. This edge is not a Magic or Bulletproof trading system or whatever you name it.
The only edge we can obtain is - THE KNOWLEDGE. The knowledge about what exactly the market is. How it operates. Which are the main participants on it and what they exactly do. How the order flowс ареgenerated and how we can analyze it, etc.
When you gain the necessary knowledge about trading, then you can become profitable trader (or Ruthless Profiteer as my partner says).
I had a few requests from people all over the world about my books. They have been published only in Bulgarian so far. Soon they will be available in English as well. I have shared all my experience in these books and hope you will find it to be very useful (for most of my Bulgarian readers it is)..
However, you can visit website (www.theultimatetradingedge.com) and receive 5 Free Ebooks about my some of my strategies, the mental attitude of winning traders and more.
This thread will be about the trading edge we can obtain. I am sure that you will agree with Napoleon Hill’s statement that one can succeed if having a Collective Genius at hand (an alliance of two or more minds cooperating for the attainment of a definite purpose). Therefore I hope that you will share your thoughts the same way I will.

Let's go back to the binary options. By definition this "is a type of option where the payoff is either some fixed amount of some asset or nothing at all". You have only two outcomes and this is what makes the binaries look like gambling. I want to tell you one truth. Only you can make the difference and choose if the binary options will be financial instrument or a type of gambling. No one else can do this for you.
Let me show you an example. On the chart below you can see my favorite STE (Svetlin’s Trick Entry) set up. Position is open when the price is testing the EMAs and theyshow that the market is in a trend. In this case the spot market had moved 10 pips (actually 7 pips before the option expiry). With the binary call I had 1:5 risk/reward ratio. If I wanted the same with the spot position I had to trade with 2 pips stop. Do you think that options can't provide some edge?
I agree option prices reflect the market’s statistics and the edge of the broker is the huge spread. That's right. However, if you want to make money you have to beat the statistics with the only tool you have - your knowledge about the market. With the binaries you have to identify situations when the odds are not 50:50 for the direction of the price. This could be done only if you know how the order flows are generated. Also with the options you cna trade volatolity which is much easily predictable than the direction of the price.

Today is an option day. Barriers at 1.3850 and large vanilla expiry at 1.3800. This could be interesting. Ifo and durable goods orders are the event risks. EURUSD road map for today (green elipse indicates buy zone)

Large options epxiries affect the spot market prices. You should learn what exactly is going on and try to take advantage. When you read about large option expiry wahtc the price action and if you see that the strike is acting like a magnet, just don't trade before the NY cut. On the chart below bulls tried to break higher, but the option strike acted like a magnet and EURUSD traded in a tight range. Don't trade tight ranges. That's one of the ways you can surely loose money.

EURUSD road map. Trend is still up. Buy zones are highlited buy the green elipses. I don't sell durign an uptrend. How I can trade this you can read in my free booklets.

Options market shows that the bulls may have probpems with eur/usd, unless fundamentals provide support. FOMC could be more dovish, as suggested by the forwards points and weigh on USD. Barriers from 1.385 to 1.42 put pressure on IV. Risk reversal slightly positive for eur bulls. Another large 1.38 expiry for today could act as a magnet. Range expected.
USD/JPY 95/100 DNT structures weigh on vols and could keep tye pair in range.

EURUSD road map. Volatility is very low. Delta neutral strategies prefered, because the uptrend is not so strong. Daily strangles are cheap.

When the spot volatility is low binary options provide good solution. Correlation trade.

Big guys are waiting for the FED. No trade on the spot when the daily roange for EURUSD is 40 pips. I may try digital or plain vanillla strangle for the London fix if the pricing provides good R/R

I decided tha binary strangle. You can see the parameters on the chart. This was a pure volatility trade. Total cost was 16.1 pts for 83.9 max profit. Half of the 1.3790 ladder was closed at 51.8 pts. The costs are fully covered and some profit is booked in cae EURUSD closes below 1.3790 .

So your strategies use both fundamental and technical analysis? Any system can be automated, and i think you could automate your system too.

Keep up the good analysis.

bluepanther, thank you. My spot entries are filtered by quote reading and this is the difficult part for programming. However with the options is different and may be I should try.

Today all eyes on FED. I'll see 1-2 hours before the announcement if the options prices provide good R/R.

Here is why I don't trade when major event is approaching. Large market participants are on the sidelines and liquidity is lower than normal. This depresses the volatility. A perfect STE set up lead to just 10 pips price jump and then the market went asleep. If you want to trade for long time learn to trade when the time is right. Otherwise you can find much better ways for gambling.

Today the market participants will probably digest what exactly FED meant with yesterday's statement. I'll wait on the sidelines unless some good volatility trade sets up. No intention to guess the market direction. The trend stays up, but retracement towards 1.3650, or even 1.3460 could be expected. For now 1.3830 caps.

On the options front vols eased after the FED meeting and 1-month is now 6.6 This means that the options traders don't expect increase in volatility. 25D risk reversal favors the puts now, which is normal given the fact that a pullback started. Actually risk reversal is pretty neutral which is a warning sign for the bulls. Larger options expiries are noted for USDJPY (98.00 (USD600 mio), 98.25 (USD500 mio).
USDJPY - DNT structures pressure volatility. Risk reversal is around zero which means that options traders don't expected trending move in any direction.

Forward points little changed after FED - means that the statement was largely discounted in advance.

STE at 20 EMA + swing hi. Stop 4p. 1st part +5.8p, 2nd +8.8p.

EURUSD is at very strong support. half of the 3rd part closed at +14p. Stop @ +2.6p

Stop @ +17p

Nice volatility trade. Long 1.3640/1.3680 binary strangle. Expiry 12:00 London time. Total cost 12 pts. Max profit 88 pts. Half of the 1.3640 ladder closed at 30 pts.

Short option expired OTM. Average profit 73 pts. R/R 1:6