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Thread: Ideas for trading with binary options

  1. #1
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    Ideas for trading with binary options

    How to create profitable trading method for binary options?

    First of all, we have to know parameters of our strategy – they should correspond to opportunities that binary option can give.

    Profilt/loss ratio

    As you understand – we have to have higher quantity of profitable trades to at least cover our costs. So, we should have strategy that would generate large quantity of winning outcomes – it should not be necessarily big moves, just small deviations in our favor.

    Trading hypothesis:

    To formulate rules for robust trading strategy, we have to formulate trading idea that would benefit from certain market conditions observed on a daily basis. Also, this idea has to be pretty simple to execute.

    If we look at distribution of daily price action on, say, popular currency pair EURUSD, we would notice that rotation of the price occurs when price returns to average sessional price, that can be easily found with EMA indicator. For example, on 5-minute chart of EURUSD, decision making points look like shown below:

    Attachment 11609

    I have to mention that day was pretty volatile – in many cases there would be much more decision making points, especially if price would trade within consolidation area.

    For sixty-second options, it’s possible to build simple scalping strategy that would be impossible to execute in conventional forex trading. If price touches 21-period EMA, we might observe at least slight pullback within next 2-3 minutes (price holds above EMA). Therefore, our trigger for entering long trade (buying «call» option) is a moment when price touches 21-period EMA from above (we can buy «put» option when price touches it from below).

    Attachment 11610

    We are talking about small pullback that does not exceed 5-10 pips, it can be 3-4 pips in most cases. So, it is considered as a «noise» for many intraday traders. In fact, if you target is 5 pips per trade, it would be tough to trade – first you have to cover your spread, then capture 2-3 pips and go away- even 1/1 profit/loss ratio can not be easily achieved in such type of trading. It does not make sense in traditional trading.

    But for binary options, it can bring some profit. You have to have at least 1 pip above strike price to realize profitable scenario – you get guaranteed 70% per bet. As you understand, it can not be achieved in traditional trading.

    But of course, we should not only find profitable pattern, but rather know – what market conditions are risky for our strategy? In other words, we have to know when price moves through moving average without any pullbacks.

    For example, it occurs after important news announcements. Below is a chart of GBPUSD after news announcement:

    Attachment 11611

    Therefore, you have to know periods within a day when you are not trading.

    Also, after elongated consolidation areas market can become extremely volatile – you have to take such periods to consideration as well. The more elongated such period was, the more volatile price action will be – also it means risk for such type of scalping strategy:

    Sometimes, period of reduced volatility pre-defines good trending move, we can use pullbacks to open positions in the direction of the trend.
    This example shows that you can build a trading strategy on short-term options (120 seconds). Also, you can use higher timeframes for your strategies using long term options with other expiration dates.

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    Last edited by Value trader; 09-03-2014 at 03:08 PM.

  2. #21
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    Well, I don't usually trade with binary options, but I know one thing, if you are a good analyst then you will be able to understand the market expected movement, and the MACD indicator is best to analyze the market on minutes interval, so using MACD will help most in binary options, another thing that we can use is chart patterns in higher time frame.

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  3. #22
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    Problem is that even if you know that the trend is bearish you can still end up losing because of volatility. The price movement is unpredictable. What if the price goes up even if the market is bearish simply because of volatility? Then you can get loss. Unlike if you trade in regular forex that you can just hold your position knowing that time will come were the trend eventually fall.

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  4. #23
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    in trading the traders need to practiced well to trade otherwise to well be a high risk to loss the profits. the binary option is good in trading forex.

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  5. #24
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    Quote Originally Posted by budado View Post
    Problem is that even if you know that the trend is bearish you can still end up losing because of volatility. The price movement is unpredictable. What if the price goes up even if the market is bearish simply because of volatility? Then you can get loss. Unlike if you trade in regular forex that you can just hold your position knowing that time will come were the trend eventually fall.
    It is true but in classic trading, you don't need to worry about volatility of market while you are trading with options, because in options you will need to see whether the price will increase or decrease, no matter how much market will penetrate, it won't hurt you, the main thing is market moves in your favor in the last minute of your bet. :)

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  6. #25
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    Quote Originally Posted by mehwishraheel View Post
    It is true but in classic trading, you don't need to worry about volatility of market while you are trading with options, because in options you will need to see whether the price will increase or decrease, no matter how much market will penetrate, it won't hurt you, the main thing is market moves in your favor in the last minute of your bet. :)
    Just one question do you know what volatility means? Its the increase or decrease of price at random basis. That's why you really need to worry if you do option trading. Because even if the trends is bearish if in the last moment the price spike up because of volatility then you loss. In short in option you can't totally rely on trends movements only. You need to learn how to deal with volatility so that you are in the right price when the option close.

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  7. #26
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    [lang=ar]I tried the handle a few times before and I find it needs a lot of experience and also can not be traded binary options in the event of news or when waiting for news as it becomes a very dangerous and unpredictable and is also need tools and indicators to be very fast and given prediction for the coming 15 to day according to the choice and there are no News[/lang]

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  8. #27
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    Quote Originally Posted by snnaky View Post
    [lang=ar]I tried the handle a few times before and I find it needs a lot of experience and also can not be traded binary options in the event of news or when waiting for news as it becomes a very dangerous and unpredictable and is also need tools and indicators to be very fast and given prediction for the coming 15 to day according to the choice and there are no News[/lang]
    Its a binary trading that we are talking in here. I don't know what you really mean of "prediction for the coming 15 to day". Back in my head its seems you are posting doing analysis usually done if you do forex trading. But binary trading is not a regular forex trading. We are maybe dealing with the same pair and the same price movements. But its has a big difference in term of trading approach.

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  9. #28
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    Do you know, guys, wich broker offers the no-deposit bonus for binary options trading ?
    Thank you very much for nice suggesting.
    My best.

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  10. #29
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    sir please provide the details on daily basis so that the newbies like me can trade with your recommendations and earn some money but it will be better if you attach the chart along with recommendations so that we can learn the things along with earnings.1

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  11. #30
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    Quote Originally Posted by budado View Post
    Its a binary trading that we are talking in here. I don't know what you really mean of "prediction for the coming 15 to day". Back in my head its seems you are posting doing analysis usually done if you do forex trading. But binary trading is not a regular forex trading. We are maybe dealing with the same pair and the same price movements. But its has a big difference in term of trading approach.
    binary option trading using the expired time, in robooption we can use the expiry time of 60 seconds and can trade long term. I think we can use technical analysis and fundamental analysis as forex trading. we can use a lot of analysis depending on the type of trader you are scalping, intraday or longterm. You can choose the expiry time according to your trading style

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