Buyers Vs Sellers Binary Options Trading Strategy

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What’s the difference between binary options and day trading?

Binary options and day trading are both ways to make (or lose) money in the financial markets, but they are different animals. A binary option is a type of options in which your profit/loss depends entirely on the outcome of a yes/no market proposition: a binary options trader will either make a fixed profit or a fixed loss. Day trading, on the other hand, is a style of trading in which positions are opened and closed during the same trading session. A day trader’s profit or loss depends on a number of factors, including entry price, exit price, and the number of shares, contracts or lots that the trader bought and sold.

An option is a financial derivative that gives the holder the right, but not the obligation, to either buy or sell a fixed amount of a security or other financial asset at an agreed-upon price (the strike price) on or before a specified date. A binary option, however, automatically exercises, so the holder does not have the choice to buy or sell the underlying asset.

Binary options are available on a variety of underlying assets, including stocks, commodities, currencies, indices and even events, such as an upcoming Fed Funds Rate, Jobless Claims and Nonfarm Payrolls announcements. A binary option poses a yes/no question: for example, Will the price of gold be above $1,326 at 1:30 p.m.? If you think yes, you buy the binary option; if you think no; you sell. The price at which you buy or sell the binary option is not the actual price of gold (in this example) but a value between zero and 100. The trading range fluctuates throughout the day, but always settles at either 100 (if the answer is yes), or zero (if the answer is no). The trader’s profit/loss is calculated using the difference between the settlement price (zero or 100) and your opening price (the price at which you bought or sold).

Binary options traders “gamble” on whether or not an asset’s price will be above or below a certain amount at a specified time. Day traders also attempt to predict price direction, but profits and losses depend on factors like entry price, exit price, size of the trade, and money management techniques. Like binary options traders, day traders can go into a trade knowing the maximum gain or loss by using profit targets and stop losses. For example, a day trader might enter a trade and set a profit target of $200 and a stop loss of $50. Day traders, however, can “let their profits run” to take full advantage of large price moves. Of course, day traders could also let their losses get out of control by not using stop losses or by holding onto a trade in the hopes that it will change direction. Day traders buy and sell a variety of instruments including stocks, currencies, futures, commodities, indices and ETFs.

Trading Forex with Binary Options

Binary options are an alternative way to play the foreign currency (forex) market for traders. Although they are a relatively expensive way to trade forex compared with the leveraged spot forex trading offered by a growing number of brokers, the fact that the maximum potential loss is capped and known in advance is a major advantage of binary options.

Defining Binary Options

Binary options have two outcomes: They settle either at a pre-determined value (generally $100) or at $0. This settlement value depends on whether the price of the asset underlying the binary option is trading above or below the strike price by expiration.

Binary options can be used to speculate on the outcomes of various situations: Will the S&P 500 rise above a certain level by tomorrow or next week? Will this week’s jobless claims be higher than the market expects? Or will the euro or yen decline against the U.S. dollar today?

For example, say gold is trading at $1,195 per troy ounce currently and you are confident that it will be trading above $1,200 later that day. Assume you can buy a binary option on gold trading at or above $1,200 by that day’s close, and this option is trading at $57 (bid)/$60 (offer). You buy the option at $60. If gold closes at or above $1,200, as you had expected, your payout will be $100, which means that your gross gain (before commissions) is $40 or 66.7%. On the other hand, if gold closes below $1,200, you would lose your $60 investment, for a 100% loss.

Binary Option Buyers and Sellers

For the buyer of a binary option, the cost is the price at which the option is trading. For the seller of a binary option, the cost is the difference between 100 and the option price and 100.

From the buyer’s perspective, the price of a binary option can be regarded as the probability that the trade will be successful. Therefore, the higher the binary option price, the greater the perceived probability of the asset price rising above the strike. From the seller’s perspective, the probability is 100 minus the option price.

All binary option contracts are fully collateralized, which means that both sides of a specific contract – the buyer and seller – have to put up capital for their side of the trade. So if a contract is trading at 35, the buyer pays $35, and the seller pays $65 ($100 – $35). This is the maximum risk of the buyer and seller and equals $100 in all cases.

Thus the risk-reward profile for the buyer and seller in this instance can be stated as follows:

Buyer

  • Maximum risk = $35
  • Maximum reward = $65 ($100 – $35)

Seller

  • Maximum risk = $65
  • Maximum reward = $35 ($100 – $65)

Forex Markets

Binary options in forex are available from exchanges such as Nadex, which offers them on the most popular pairs such as USD-CAD, EUR-USD, and USD-JPY, as well as on a number of other widely-traded currency pairs. These options are offered with expirations ranging from intraday to daily and weekly. The tick size on spot forex binaries from Nadex is 1, and the tick value is $1.

The intraday forex binary options offered by Nadex expire hourly, while the daily ones expire at certain set times throughout the day. The weekly binary options expire at 3 P.M. on Friday.

For forex contracts, Nadex calculates the expiration value by taking the midpoint prices of the last 25 trades in the forex market, eliminates the highest five and lowest five prices, and then takes the arithmetic average of the remaining 15 prices.

Examples of Binary Options in Forex

Let’s use the EUR-USD currency pair to demonstrate how binary options can be used to trade forex. We use a weekly option that will expire at 3 P.M. on Friday, or four days from now (or Monday). Assume the current exchange rate is EUR 1 = USD 1.2440.

Consider the following scenarios:

1. You believe the euro is unlikely to weaken by Friday and should stay above 1.2425. The binary option EUR/USD>1.2425 is quoted at 49.00/55.00. You buy 10 contracts for a total of $550 (excluding commissions). At 3 P.M. on Friday, the euro is trading at USD 1.2450. Your binary option settles at 100, giving you a payout of $1,000. Your gross gain (before taking commissions into account) is $450, or approximately 82%. However, if the euro had closed below 1.2425, you would lose your entire $550 investment, for a 100% loss.

2. You are bearish on the euro and believe it could decline by Friday, say to USD 1.2375. The binary option EUR/USD>1.2375 is quoted at 60.00/66.00. Since you are bearish on the euro, you would sell this option. Your initial cost to sell each binary option contract is, therefore, $40 ($100 – $60). Assume you sell 10 contracts, and receive a total of $400. At 3 P.M. on Friday, let’s say the euro is trading at 1.2400.

Since the euro closed above the strike price of $1.2375 by expiration, you would lose the full $400 or 100% of your investment. What if the euro had closed below 1.2375, as you had expected? In that case, the contract would settle at $100, and you would receive a total of $1,000 for your 10 contracts, for a gain of $600 or 150%.

Additional Basic Strategies

You do not have to wait until contract expiration to realize a gain on your binary option contract. For instance, let’s say by Thursday the euro is trading in the spot market at 1.2455, but you are concerned about the possibility of a decline in the currency if U.S. economic data to be released on Friday are very positive. In this case, your binary option contract (EUR/USD>1.2425), which was quoted at 49.00/55.00 at the time of your purchase, is now at 75/80. Therefore, you could sell the 10 option contracts you had purchased at $55 each, for $75, and book a total profit of $200 (or 36%).

You can also put on a combination trade for lower risk/lower reward. Let’s consider the USD/JPY binary option to illustrate. Assume your view is that volatility in the yen – trading at 118.50 to the dollar – could increase significantly, and it could trade above 119.75 or decline below 117.25 by Friday. You, therefore, buy 10 binary option contracts (USD/JPY>119.75, trading at 29.50/35.50) and also sell 10 binary option contracts (USD/JPY>117.25, trading at 66.50/72.00). Therefore, you pay $35.50 to buy the USD/JPY>119.75 contracts, and $33.50 (i.e., $100 – $66.50) to sell the USD/JPY>117.25 contracts. Your total cost would be $690 ($355 + $335).

Three possible scenarios arise by option expiration at 3 P.M. on Friday:

  1. The yen is trading above 119.75. In this case, the USD/JPY>119.75 contract has a payout of $100, while the USD/JPY>117.25 contract expires worthless. Your total payout is $1,000, for a gain of $310 (or about 45%).
  2. The yen is trading below 117.25.In this case, the USD/JPY>117.25 contract has a payout of $100, while the USD/JPY>119.75 contract expires worthless. Your total payout is $1,000, for a gain of $310 (or about 45%).
  3. The yen is trading between 117.25 and 119.75: In this case, both contracts expire worthlessly and you lose the full $690 investment.

The Bottom Line

Binary options are a useful tool as part of a comprehensive forex trading strategy but have a couple of drawbacks in that the upside is limited even if the asset price spikes up, and a binary option is a derivative product with a finite lifespan (time to expiration).

However, binary options have a number of advantages that make them especially useful in the volatile world of forex. For starters, the risk is limited (even if the asset prices spikes up), the collateral required is quite low, and they can be used even in flat markets that are not volatile. These advantages make forex binary options worthy of consideration for the experienced currency trader.

Binary options trading strategy that generates 150% return.

Binary options trading strategy that generates 150% return.

Your broker doesn’t want you to know this!

In this article I would like to share with you what I learned when I first started to trade binary options.
I will describe my binary options trading strategy that I used for almost two years.
The strategy made me over 150% annual returns while risking 5% at the time.

I will also share with you something very extraordinary.

Something your broker doesn’t want you to know.

This is a “trick” that will allow binary option traders to shift theodds their way!

Stick around because this is very interesting indeed.

Let’s start from scratch

What are binary options?

I won’t be going into technical details of what an option is and how it works. A binary option is simply just another derivative of the common option izmir çıtır escort traded across the global markets.

Your binary option broker;

  • goes to the market
  • buys the option
  • re-packages it
  • and sells it to you as a “binary option” with a massive mark-up!

CALL and PUT

The trader buys the option at the so called “the strike price”.

If the trader bought a CALL option, he/she bets on the price going higher – above the strike price. If the price is above the strike price (even by one pip), the izmir yaşlı escort trader wins the bet at the expiry date.

The same stands for short positions.

The trader buys a PUT option if he/she believes the market is going lower. If the market price is lower than the strike price at the expiry, the trader wins the bet.

Broker – The only winner in the binary options market.

The guy who invented this industry is a genius indeed!

The very basic premise the industry works off is:

In a very long time frame the amount of buyers (Call options) equals the amount of sellers (Put options).

Based on the above principle, the broker will never lose money, assuming he will be in the business long enough to overcome possible exceptional markets swings.

The simple genius of the binary izmir escort otel option industry is:

For every loser there must be a winner so:

  1. There are 100 buyers (let’s call them losers) and
  2. There are 100 sellers (let’s call them winners)

In this scenario:

The broker charges the looser 100% and pays out 70%-80% to the winner, keeping a whopping 30%-20% of every bet in his own pocket.

To get some perspective – your ordinary FX broker charges you a paltry 3 pips!

What a loser he is!

If you buy the option for $100 -and you lose, your $100 is gone but

the guy who is on the other side of your transaction wins.

He receives an $80 payout from the broker.

The broker cashes $20 no matter what happens! This is a fat margin indeed!

All the binary option broker needs to do is to maximise the trading volume to increase profits and lower the risk.

This is why the industry offers such a wide selection of expiry dates. Traders can trade anything from 1 min to 6 months. As more often as better!

I guess, most of the volume is weighted towards intra-day expiry as the industry attracts gamblers looking for a thrill rather than long term professional traders.

This is Genius, genius, genius!

The other, even more interesting feature of this industry is the marketing spin

“HIGH – UP TO 80% PAYOUTS!”

The marketers are spinning “HIGH” – up to 80% pay-out as exceptional and attractive.

Twitter is littered with display ads full of hot chicks and luxury yachts.

People seem to go for it like there was no tomorrow.

Remember one simple thing:

Getting anything less than 100% of the money you risked is simply bad economics.

80% pay-out risking 100% every time will drain your account within no time.

It’s insane to believe you can sustain long term profits getting less than you risk every time! The guy above will not make it!

Odds, accuracy and the Risk Reward Ratio in the binary option market.

A good binary options trading strategy is naturally one that brings profits on a regular basis.
There are a few tasks to be performed before deciding on your trading strategy.

Break-even
Since break-even is achieved when the total amount won equals the total amount lost, it can be calculated using the following formula;

0 = Winning% X Average Return – (1 – Winning %) X Average loss

For example:
Say the traded amount is constant (same every time), average return 70%, and the loss is 100% of the betting amount therefore;
0 = Winning% X 70% – (1 – 70%) X 100% therefore; Winning % = 59%


With a strategy which has an average return of 70%, you will need a winning accuracy of 59% or more to be profitable in the binary options trading industry.

Expectancy
A more general way to analyse any binary options trading strategy is computing its expectancy. This is a single number that combines the winning percentage with the average return. This number tells immediately if the trading strategy is worth pursuing or not. If the expectancy is greater than 0, you should consider it, if it’s not – move on from it.

Formula is:

Expectancy = Average Return x Winning trades % – (1 – Winning trades %)

Say; binary options trading strategy has average return 70% and 65% accuracy
Expectancy = 70% X 65% – (1 – 65%) ; Expectancy = 0.105. The strategy should be considered sound.

It’s a well know principle of basic risk management to keep losers smaller or equal to winners. This applies across all markets. Every trader works very hard to keep losers smaller or equal to winners.

It is impossible to keep your losers smaller or equal to winners trading intra-day binary options. Your pay-out will always be 80% of your money at risk.

These are facts. You need to think harder to stay ahead in this market.
Trader must go against the odds and design a binary options trading strategy than generates more winners then losers to compensate for the unfavourable pay-outs.

It is not always possible.

If the trader is able to generate more wins than losses with the average loser being less or equal to the average winner, it is definitely a recipe for a financial independence.
It is a statistically sound approach and it is sustainable in the long run.

Apart from the points above, the trader should consider other variables like trading times, asset class, brokers etc. It is important to get all variables tested before deciding to use them. Profitable binary options trading strategies combine only the most efficient choices.

This is the technique I developed trading binary options. This is the technique I want to share with you today.

This technique generated 150% return by risking only 5% per trade

“End of Day”options

Something your broker doesn’t want you to know.

Back in 2020 I started to experiment with strategy and different expiry options. I tried every time frame offered by the broker. 1,5, 10 minutes, 1 hr.

I have tested each strategy and tried to match them with the expiries.

My trading logic was sound and I could be more than 60% accurate in the short term but I knew I might not always sustain 60%+ accuracy.

I would struggle to generate profits in the long run due to poor pay-outs.

I had to be over 60% accurate at the 80% pay-out to break even.

On the top of that I had to account for human mistakes, missed trades, losing streaks and loss of confidence and more.

I was ready to give up when I discovered “END OF DAY” OPTION!

“End of Day” expiry options changed everything.

You can close End of Day binary option before it expires getting back some premium on losing positions.

And this is not something your broker is advertising!

Example:
I bought $100 CALL option at 5:30pm expire end of day – 10pm.

If it was an option less than one-day expiry (1,5,10 min, 1hour), I would lose my full $100 if the option expired “out of money” nor I would be able to close the option before it expired.

“End of day” binary option holds some value during its lifetime and it can be can closed before it expires.

In the case where the market going against me, I can close the “out of money” option and get back some premium.

This means that if I bought a CALL option of $100 and it went against me, I would be able to close it before it expired and I would get back $10-$20.

In this scenario, my losers are getting closer to my winners and I shift the odds in my favour.
I traded “End of day” binary options for almost two years generating awesome returns.
I manged to keep my losers as big as my winners and my accuracy was outstanding.

IMPORTANT:

You can close your positions up to 15min before the exchange closes. The closing time varies between the brokers. Please check opening hours before you start trading

See some notes from my journal.

Please pay attention to the accuracy and the average loss vs an average gain.

April Performance

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Notes:

I managed to retain a long term average accuracy of the system with 11 winning positions against only 5 losses. The average loss also met expectations and stayed well below the pay-out amount.
My trading account grew astonishing 36.4% in just four weeks.

May performance

Notes:

Placed 21 trades in May, this included an astonishing 16 winning positions and only five losers, giving an overall accuracy of 76%! This is beyond the long term average accuracy of the system.

The average loser amount remained within expectations and stayed below the average winning payout.

Total nominal winnings amounted to €3530.3 and loses showed €-911.68.

The account growth rate doubled since the last month and reached 63%

Had maximum two consecutive losses in May recorded in the trading account.

Trading was performed in the live environment applying strict money management techniques.

July performance

Notes:

Recorded 17 winnings and one loss. This accounts for 94% accuracy in the month of July! My Trading account added €3,948 fresh equity and gave up only €70.1 in the process.

From 08th July to 30th July I recorded 14 consecutive winning positions. It is needless to say, this is outstanding result and all time achievement.

The monthly account growth read 67% and remained within long term expectations.
As of today, the total equity accounts for €11,393 and stand for 570% growth in two quarters.

All signals allowed a decent amount of time to fill the positions and provided an easy opportunity to trade.
The above signals performance is 100% live traded.

August performance

Notes:

21 trades in August, only 6 ended the day in money and 3 resulted in loss. Had 9 trading days with no signals and 3 of the trades did not fill due to fast moving prices.

September performance

Notes:

September 2020, as expected brought back to the more normal trading conditions.

I placed a total of 19 trades. Recorded 14 winning positions and incurred 5 losing trades. This accounts for almost 74% accuracy. This is slightly above the long term average.
Unfortunately, the average loss climbed above the average win this month.
This was due to higher than normal volatility during the US session.

I grew the account by a healthy 35%.

These are only a few months of notes but its needless to say that trading “End of day” options are the way to beat the binary markets.

For most of my trading I manged to keep loses near or below winners and keep the accuracy way above 60%.

As you can see from the figures, this is a really profitable technique.

My Binary options trading strategy generates 150% risking 5%.

So now you know how to shift the odds to your advantage. All you need now is a trading strategy that generates over 60% winners.

I developed a few things about the strategy to trade these specific options. I used to place only one trade per day between 3 – 5pm gmt and I let it expire if it was in money or I closed it if I knew it was going to expire out of money. I was right on balance and got better with my judgment over time.

The binary options are priced based on time and volatility. More volatility in the price action causes the premium to disappear.

It is important to avoid high volatility day when using this strategy. As less is going on the market, as more profitable the strategy gets.

A FEW FEATURES

  • It is a simple daily swing strategy based purely on price action.
  • It allowed me to place pending orders so it wasn’t time consuming at all. It took 10 min a day to setup a pending order on MT4 and copy to my binary account.
  • It allowed me to be out of the market at the end of the day. It suited my lifestyle at the time.
  • It performed the best on GBPUSD and EURUSD during low volatility periods.
  • It was deeply tested in any conditions before put to use with real money.

I believe you are a professional trader and you could try any of your own methods. There are many trading techniques to apply but if you like to get this trading method together with MT4 indicators and templates.

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    Binarium

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    Free Demo Account!
    Big Sign-Up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!!!

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