Binary Option Alliance

Your Edge To Success

Category: Risk Management

Why binary trading favors new traders

When forex trading was first introduced to the masses, it was widely considered the “newbie’s discipline”. Trading the forex market was considered accessible to everyone because it had less constraints. You could open an account for a few hundred bucks, and you could trade it using fairly easy to read charts, from home, whereas stock trading required you to have at least a few thousands of dollars and sometimes trade from the exchange itself.
In comes binary. Binary trading is now the “new” forex trading. New traders favor binary trading over anything else for many reasons, and they are right to do so. Let’s see a few of those reasons here.

  • Binary trading is extremely easy. You don’t have to bother with risk management, stop losses, counting trade size, converting in lots, and all that. You pick an amount you’re willing to risk, pick a side and press a button. Everything is done, there is nothing else to do.

 

  • You can literally start trading with a 10$. Some brokers allow you to deposit ridiculously small amounts to trade. They have made trading accessible to virtually anyone by doing so, and that’s why new traders like to join binary brokers over forex brokes. They can deposit a few bucks and start trading in a matter of minutes.

 

  • You know what you’re in for. If you’re risking, say, 10$ on a trade, you know exactly what you’re going to lose if you lose (10$) and what you’re going to win if you win (a percentage of 10$ set when you placed the trade). There is no slippage, no extra cost, no commissions.

 

  • It’s fun. A least it’s a lot more fun than trading forex on weird charts. Binary trading almost looks like a game, but a game that can make you a lot of money.priceactiontraining

 

Trend Trading Binary Options

Going with the Trend

Trend trading– As far as “tricks” in trading go, trading by following trends has to be the oldest one in the book. Following the trend is THE go-to advice experienced traders will give to anyone wanting to start trading.
Although it is good sense to do so, some traders still get confused about the way it should actually be applied. In this article we’ll go over what trading with the trend is, and how to spot trends easily.

What does Trading with the Trend mean?

Trading with the trend means exactly what you think it means: it’s spotting a trend (a long term direction in the market) and following it.
Basically you want to spot whether the market is going up or down, and place your entries according to that direction.
The general idea is that usually long term trends tend to last… well, a long time. Therefore if you were to jump into long trends at the start, you could potentially ride them until the end and make a boatload of money.
It also means you can add to your position gradually every step of the way. This obviously depends on the type of strategy you’re using, but it should be your goal to always place your trades in favor of the dominant trend in order to put the probability of winning the trade in your favour.

How to Spot the Trend?

how to spot a trend in binary options

Obviously the first issue for new traders is to actually spot the current trend. Markets can go 3 different ways: up, down or sideways. Even though there are only 3 solutions, things can get confusing so let’s define how we look for trends once and for all.
First step is to open your charts, and zoom out. You don’t want to be seeing big candles or bars. Zoom out until you can see quite a bit of data on your charts.
Now sit back, and look: where is the market heading? Think like a 5 year old. If you were to ask to a 5 year old, “Where is the market going?”, what would he say? If you have a 5 year old, ask them! Its quite easy to spot when you don’t over think it.

How to Trade the Trends in Binary Options

Trading and following the trends is probably the single best way to make money in the markets. It has always been the strategy that big investors use, and this since the very early days of market trading.
Trend trading in the traditional markets (forex, stocks, etc.) is fairly straight forward. All you need to do is spot the current trend, build a strategy that allows you to jump in it at profitable points, and apply your rules the best way you can.
In binary trading though, it can become a bit more difficult. In this article we’ll see why it’s more difficult to trade the trends in binary options.

Trend Trading in Binary Options

binary-options-trend trading

The difficult part of trading the trends with binary options is that you’re locked into a trade for a certain amount of time, with what seems to be no power.
Let’s say you were to place a long term trade in the regular forex market, following the current up trend. It would be easy for you to regularly check up on your trade and adjust your risk. You could for instance move your stop loss up, close some part of your trade to limit your risk, or even just close the trade if you feel like you’ve taken all you could get.
In binary trading, you simply can’t do that, hedging your trade if the trend goes against you is the a good way to minimize risk, You can also manage your trade for a double profit setup, but that is more suited to a non trending market situation. Once your trade has been placed, you have to wait for the expiry to kick in, however, with some platforms you have the ability to sell off your position before your expiry, at a small loss if the trade goes against you or for a profit if the trade is going your way, which is essentially  the same stop loss system regular forex traders use without all the complications.
You definitely can make money following the trend in binary, you just have to adapt to the market conditions and manage your trades accordingly.

Trend trading clock

Finding the current trend is one thing, figuring out which expiry you should take is another. Try to think in absolutes: where is the market likely to reverse or slow down, and how fast is the market moving? (volatility) If the market is moving in quick successions of high numbers of pips, you might be better off placing a short term expiry on your binary trade, If the market is moving very little and is not showing many signs of being volatile then its wiser to extent your expiry times.
There are a plethora of ways to use the trend in order to trade binary options profitably. It is one of the simplest and most reliable chart patterns and can and should be integrated in all strategies while trading. If you have any questions about using the trend to trade binary options or would like to share your story of trend trading please do so in the comments section.

Day Trading Binary Options

Day trading – A Love Hate Relationship

Ha, day trading! Who hasn’t heard about day trading? It’s pretty much one of the first things a new trader reads about after the first boring articles about support, resistance and EMAs.
Day trading is the dream for many traders. It’s the skill of being able to make money in short term trades, sometimes tons of money within a few minutes.
Day trading is also the pitfall of many cowboy traders who think they are fit to risk enormous amounts in high variance trades. Most of the times these traders do it for the show, for the adrenaline pumping through their veins, more than for the money they could potentially earn.
Should you, or should you not, day trade? That’s the question we’re going to ask ourselves now.

Why you shouldn’t be day trading

day trading-why you shouldnt be

Day trading is extremely risky. Like we mentioned earlier, day trading consists of taking high risk positions for a short amount of time hoping to cash in on very quick movements in the market. Most day traders don’t hold their trades for more than an hour. It’s extremely fast.
If you’re new to trading, resist. Do not day trade within the first year of investing in the markets. It’s tempting, but it’s going to cost you. A good alternative would be to day trade with a demo account. See how it feels, have fun, but don’t invest any real money in it.

Why you should be day trading

Day-trading- why you should be

If you have the experience (and have developed a skill for it by, for instance, practicing on a demo account for a few months), day trading can be very profitable. It should be encouraged to have both a day trading and a long term trading strategy in your arsenal.
Once you spot a long term trend, you could place a long term position which will give you profits over time, and at the same time take small day trading stabs at the market for more rewards.

How to day trade in the binary options market

Day trading, the art of opening and closing profitable trades within the scope of one day maximum, is all most binary traders can talk about these days. The fact is that binary trading and day trading are extremely well correlated.
Binary trades can, by definition, be opened and closed within very short amounts of time. Some experienced traders can place numerous trades per day using expiries as low as 30 seconds. This means that each time they open a trade, 30 seconds later it closes at a loss or a profit. It’s an extremely fast form of trading and is becoming very popular.
Coupling day trading and binary trading can be very profitable, but you have to know what you’re doing. In this article we’ll go over a short plan (the basics) that should allow you to be prepared to dive into this exciting world.

A plan to day trade in the binary options world

Binary-Options-Day-Trading
The first thing you need to settle on while day trading binary options is a strategy. Most binary traders use momentum based strategies, which means they enter the market when there’s a strong push on either side of the market, hoping to capitalize on that quick movement.
Once you have found a strategy that works for you, you need to decide which expiry you want to trade on. It’s important not to take the lowest possible expiry just because you feel like you’ll be able to place more trades. More isn’t always  better. Find an expiry that works in your brain (you can handle its pace mentally) and that fits the strategy you’ve built.
Anywhere between 5 minutes to a couple hours are good day trading expiries, especially for momentum based trades.
The last thing you need to do is plan your money management. Give yourself a stop loss for the day, (ie stop after 2 losing trades) and try to trade on risk free capital as soon as you get the chance.

 

Are you Day Trading Binary Options? Whats your experience with day trading? Let us know in the comments section below!  Happy to answer any questions you may have regarding the topic;)

Swing Trading

The Perks of Swing Trading

Before we delve into the advantages swing trading can offer to a good trader, we must define exactly what swing trading is. Swing trading, in its purest form, is all about taking long term positions in a market. It’s basically the exact opposite of day trading, which is opening and closing trades within one day (or even within an hour).
Swing trading, or long term trading, offers many advantages to new and experienced traders. More often than not, new traders get bored really quickly and decide to jump into day trading because it’s obviously more exciting to be opening tons of trades every day. However, this often turns out to be a bad decision, as new traders don’t have the experience to handle such volatility and variance in the market.
This is the reason for this article! Let’s see exactly why you should be swing trading first, then maybe day trade here and there on the side.

The Advantages of Swing Trading

swingtrading2
As we said, swing trading is all about taking long term positions in the market. One of the big advantages of swing trading is that it’s actually long term, which means you don’t have to make quick decisions all the time like you would on a day trade.
You can start trading H4 charts and only have to update your trades every 4 hours. That gives you a ton of time to study, work, have family time and so on.
Swing trading also relies on long term trends, which tend to be more reliable than short term time frames. You can get into a long trend and ride it for many months without ever looking back.
Finally, swing trading is extremely easy to back test. You can take pretty much any strategy, plot it on a H4-D1 chart, go a few years back in time and start testing. You can rely on the results you’ll get because the charts are clear and the trends are reliable. It makes it very easy for any trader to decide if a strategy is profitable or not.

Does Swing Trading apply to Binary Options?

Swing trading has been around for many years. Some might even argue that it was the first real form of trading, as back in the days where internet didn’t exist yet (I know, scary right?) the data gathering process took much longer than now, therefore it took a while to find trades and people tended to hold positions longer.
With the age of the internet came faster access to more data, and faster execution of trades. Spreads reduced as well, which drove a ton of traders to try and beat the market for a little bit of money many times per day – hence day trading.

Swing Trading and Binary Trading

swing-trading-strategy
With the recent apparition of binary trading, traders have been placing trades faster than ever. Some binary brokers offer expiries as low as 30 seconds, which literally means you could be placing trades every 30 seconds and make money.
The clash of the titans comes when you start to think about compiling swing trading with binary trading. Could it be possible to make profitable long term trades using binary options?
The answer is a quite resounding yes!
Swing trading is all about trends. Whether it is in the stock market, forex or in binaries, if you’re looking to place long term positions you have to look for the trend and adapt your position to it. Therefore it’s not unconceivable to build a strategy that revolves around finding a long term trend in H4/D1 charts and placing One Day expiries or longer on your binary trading platform.

Risks and Reward

Risk and reward swing trading
The biggest risk you’ll encounter while swing trading in the options market is boredom. Be very sure to build a strategy that you know works (hint: backtesting!) and that you trust, or you’ll quickly go back to those potentially deadly 30 second trades.
The reward however is huge. If you play the trends well, you could pile trades up and make a ton of money following the herd of traders.

 

High Frequency Trading

High frequency trading on the financial markets can be an exhilarating ride but it can also be a rather expensive ride if you either do not have a plan or if your plan is very poor. When it comes to high frequency trading you need to have the right mindset because it can be one of the most profitable yet stressful forms of trading on the markets. You are likely going to have fair amount of losses but it is made up for by an even greater amount of wins.

What is High Frequency Trading?

Typically, high frequency trading is done by very powerful high speed computers that execute trades by transmitting millions of orders at lightning speed with the ability of making millions of dollars in just a few milliseconds. In fact, some of the high frequency trading algorithms used by the top high frequency traders enable them to literally look into a crystal ball just before making a trade to find out where a stock is going before they place their order and crazy thing is that it’s totally legal.

History of High Frequency Trading

high frequency trading computers

  • In 1998, USA Securities and Exchange Commission authorized electronic exchanges to integrate High Frequency Trading that could execute trades 1000 times faster than humans.

  • In 2000 High Frequency Trading accounted for fewer than 10% of equity orders.

  • In 2002, HFT( High Frequency Trading) made up 56% of the equity trades in the US market.

  • In 2011, ‘Fitnetix’ developed a microchip called “Nano trading technology” that revolutionized high speed trading and boosted HFT to a level where trades could be executed in nanoseconds.

  • In 2012, HFT made up the largest amount of equity trades. Estimated at 70% of all equity trades were high frequency trades.

  •  In 2013, It is estimated that $600 million worth of assets were traded in just a few milliseconds through the use of HFT, a record which has since been passed with the rapid development of many different high frequency trading systems.

The Different Types of High Frequency Trading Strategies

high frequency trading rigs

High speed trading has been taking investment houses by storm, capable of turning over large amounts of capital because of the computerized advantages involved. When High Frequency Trading is done with large investments, the profits can be substantial. There are many variations of high frequency trading strategies that exist and executed by programmed computers using pre-written algorithms. These algorithms are able to factor in may variable market conditions such as trend direction, pair movement and correlation, breakouts and rebounds of support and resistant levels, approach angles as many more. These same algorithms can also incorporate technical indicators such as the MACD, Stochastics and moving averages. Just about any technical indicator can be incorporated into a HFT algorithm and the most advanced traders develop, adapt and use these High Frequency Trading setups to scalp the market taking fast profits.

How People are using High Frequency Trading

high frequency trader

HFT has been around for many years now and people are jumping the queue to grab a bite from some of the best high frequency trade orders. In fact, there are so many High Frequency Trading Systems out there that it has created a lot of mixed views about HFT and the debate about the legality of it is likely to continue in the absence of concrete steps taken by the market regulators. With the right regulations in place, there would be much more transparency and less volatility. Ever seen the market behave radically without explanation? Some Big Shot Banker probably just fired up his HFTS ( high frequency trading system) and it can affect a lot of short-term investors as well are professional traders who are participating in the same market. As an individual investor or trader, rather than waiting for the regulators to bring about radical changes with regards to high-frequency trading, learn proper risk management techniques that will protect you when the market goes against you, limiting your exposure and ultimately saving your capital.

How High Frequency Trading affects the Financial Markets

high frequency algorithm

While it’s impossible to say how each and every trade placed affects the financial market or whether or not the trading world has been helped or harmed by high frequency trading, the biggest winners when it comes to trading appear to be institutional investors who are patient traders and the knowledgeable investors who trade individually, both types of investors benefit from the much higher payouts and narrower spreads that exist today. The Biggest losers are the institutional investors who have not adapted their investment and trading strategies to the modern paradigm. The most frequent losers are the gamblers, the risk takers and traders who trade without proper knowledge of the market or without a trading strategy.

Technology Used In High Frequency Trading

High frequency trading is a primary form of algorithmic trading in finance. Specifically, it is the use of sophisticated technological tools (highly configured computers) and computer algorithms to rapidly trade securities. Individual Traders can also be considered high frequency traders if they execute a large volume of trades in a short period of time.

Relation to Binary Options

binary options +high frequency trading

One of the more advanced strategies you can use while trading binary options is called the high frequency strategy. However, it is not a strategy that I would recommended you focus on if you are a new trader. Once you have more experience, the strategy can work very well and can generate a large amount of profits in a short time. In most cases this strategy is only used by professional traders who use have access to automated trading algorithms and they use these algorithms to execute multiple trades in milliseconds which is just not humanly possible.
To effectively use a high frequency trading strategy you will need to make several quick trades. In binary options, the shortest trade you can make is 30 or 60 seconds trades which are both suitable for the strategy. The strategy is fairly simple – All you will need to do is place a series of trades based on in-depth market analysis and signal identification. Access to the latest information and tools will certainty give you a profitable edge but ultimately your profitability depends on your ability to read the market.

Conclusion- Should Traders be worried?

High frequency trader loser

High frequency Trading is evolving at a rapid rate with the technological advancements of the modern world reaching new levels of growth. In the coming years we can expect high frequency trading to become more and more common and more advanced. Personally, I don’t have any beef with high frequency trading, I do have a few High Frequency Systems in my trading tool box but I prefer to have the final say in all my trades. I use them as more signal/forecast service to identify possible reversals, rebounds and breakouts and for that reason I believe high frequency trading definitely has its benefits.

What do you think about high frequency trading?
Have you experienced it?
Would you consider giving it a look?
Please leave your thoughts and comments below!

Risk Management for Binary Options

Managing Risk is Important With Binary Optionsstrong-risk-management binary chain

Learning proper risk management plays a very important part in becoming a successful Binary Option Trader. Risk Management, which is similar to the insurance policy protecting the value your car, house, or any valuable asset to you, is an important element to any financial investment. When it comes to binary options, the risk potential that you face is limited in that you don’t lose more than your initial investment. In addition, if your trade expires out of the money, you can still receive a small percentage of your beginning investment back to your trading account with some platforms. Managing risk correctly while trading options can make the difference between profiting in your trading career and clearing all of your capital completely.

For every trader, it is very important to have a good understanding of how much risk you’re exposing yourself to if you desire to be successful in binary options. The purpose of this article is to look at the importance of effective risk management, how to control your losses and what strategies to use when managing your risk while trading binary options.

Why Managing Risk is so Important

risk_management binary options
Risk management is one of the main elements to profiting in the world of investing. Binary options traders have the knowledge of how much risk and profit potential they have before they place a trade. However, this doesn’t eliminate the risks involved with trading. Learning and applying effective risk management strategies is the how you eliminate risks while trading on the financial markets.

As a trader, you have to have know that you have the ability to lose all of your money without being cautious. risk management options
This is an easy concept to grasp, where most people struggle is when it comes to the actual application of it. Most Brokers place a lot of emphasis on the benefits of binary options while ignoring all the downfalls, which causes a lot of traders to believe that placing large risky trades with big money aims are the way to go.

What to do about Risk Management

It’s very easy for those that have a demo account to practice risk management, I do have to mention that trading on a demo account is often quite different to REAL trading, You see, after emotions and real money come into play, the game changes completely. Emotions can cause weird and wonderful thoughts to occur which affect the decision making process.

no fear trading optionsImagine placing trades with full confidence, without the fear of loss because you have a system that works. This is why managing risk with binary options is so important, so when the market moves against you, you are calm cool and collected because you have a system in place that works. My “System” is called The Successful Edge and it’s not really a system it’s a methodology taught to me over the years by a 30 year trading veteran.

Risk Management: Loss Control

One of my recommended ways to manage risk is by taking control of your losses from each trading position. First you need to understand that losing in binary options is completely normal. Don’t Panic!  All professional traders lose every now and then. Winning each trade every time is just not realistic.

Binary option platforms do not utilize the stop loss feature you have with forex and stock trading platforms. Instead, you can cover your lost trades by hedging your trade or by covering your loosing trade with a trade whose profit will cover the lost investment plus an addition to your total capital. To learn more about how to implement one of these strategies please see the Double Profit Tutorial

Bottom Line- Risk Management in a Nutshell

 

If you don’t manage risk correctly you are living on the edge of disaster.  Managing your risk profit loss binaryrisk in binary options is all about maintaining control of your trades, so until you are confident with your risk management procedure I suggest managing only a few trades at a time. The more trades you have open, the more risk you will be exposed to. Makes sense doesn’t it? Less trades lowers risk. The more control you have on risk exposure, the more flexible you can be when the occasion arises. As a trader, you should have the ability to act when an opportunity in the market arises. Directing your attention to managing risks correctly will enable you to continue trading even when things don’t go as planned. Managing your risk while trading Binary Options is very important as it can be the difference between being a professional binary options trader or another chart statistic.