Binary Options

[kent 10]

i've come across this way of trading it seems alot simpler any thoughts would be appreciated thanks kent..

[katie27 10]

Learn before you go for live trading account, demo account is best for learning and most of the trading companies provide this facility. After doing training go for live account and choose your trading platform that suits on your strategy and goals.

[JMB 10]

Hello Kent,

 

Binary options look good (as its promoted to be and look simple) but it goes directly against every form of effective investing/trading.

The payout on these Binary Options are 70% to 81% ON YOUR INITIAL "INVESTMENT".

This literally means that you will win $70usd to $81usd for every $100usd you put in, If you lose you lose your $100bucks, which in turn means a horrible negative Risk/Reward ratio.

Imagine taking a regular Forex trade where you put your stop at 100 pips away to make only 70 pips on your target. Some traders on these forums don't want to know anything about Risk/Reward ratios and that's ok but i have yet to see anybody making money with a strategy where you can loose more money when you lose then when you can win money when you win.

[JMB 10]

Let’s take this a bit further.

 

Let’s say that you see a nice trade in the EUR/USD and you take a short (sell) for example. You put your stop 20 pips above your entry and your target (in case you only work with one target) is 60 pips below your entry price. That is a positive Risk/Reward of 3:1. If you lose you lose 20 , if you win you win 60 pips,......Simple. You can actually lose 2 times this trade and win only one time and still come out ahead, but that’s not all. You can choose to close your trade whenever you feel, you can also close a part of the trade when you get to your target and look for a 2nd target and so on.

 

When you open a Binary option "trade" with let’s say $100usd and the payout is 81% they take your $100usd when you open this trade and pay it back to you when you win + the 81% on that $100usd. Many beginners at this will think that they actually won $181usd but we all know it’s just $81usd. Also when you open a binary option trade you have to wait it out until the hour (or whatever amount of time you choose) is over and get paid or loose. You have no saying over that trade once you are in. When you lose one trade you now have to win the other one to come out ahead, not to speak about a losing streak.

 

And then another thing. As you have probably noticed on all these sites this Binary Options trading is largely promoted to Forex traders as this is a very big retail group where 95% (if not more) of them are losing all their money, ....why would you think that is?

 

I know it all looks easier as you just have to bet (yes this is a wager on a derivative) on an up or down move but don't fall for it. Never take a trade where you can lose more than you can win, the only time in life when you would do that is when you buy a new car that drops in value when you drive it out of the showroom and where you will never get the same money back for it when you want to sell it

[Gekko78 10]

I traded binary options with Banc De Binary last year..... was ok at it... Made some money , lost some money . Not really for me ....the thing I did not like about it is that in order to really make make money you have to be right more than 50% of the time. With regular trading this is not the case.....

 

I addition its pretty much an all or nothing bet.........1 point away from your target = loss

 

Now some companies allow you to protect some of your capital .....you can choose to retain some money if you lose but your payout if you win is a lot lower.

 

To me this is gambling. it is like rolling the dice. At least with trading you have the option to get out with small /gain .....I have not really seen any decent strategy that allows for winning .

 

 

As far as demo trading the last time I checked you have to fund and account in order to get a demo.....at least thats how it was last year may have changed since.

[JMB 10]

I traded binary options with Banc De Binary last year.....

 

Banc de Binary is registered in Cypress. Most of them are b.t.w. I wonder why.

[BlueHorseshoe 10]

Imagine taking a regular Forex trade where you put your stop at 100 pips away to make only 70 pips on your target. Some traders on these forums don't want to know anything about Risk/Reward ratios and that's ok but i have yet to see anybody making money with a strategy where you can loose more money when you lose then when you can win money when you win.

 

Hi JMB,

 

As a general rule, all else being equal, you'll find that the larger your stop-loss the higher your win-rate. A risk/reward ratio of 10:1 where the stop is ten times the size of the target can push a win rate well above 80%. The converse is also true - as the ratio swings the other way then the win rate will typically decrease below 50%.

 

Consider Trend Followers who have very small stops and (theoretically) very large profit targets. They have a low win rate.

 

Now consider scalping strategies that will risk a full point to make a single tick. They have a high win rate.

 

Correctly compared (disregarding trading frequency etc) neither strategy is inherently more likely to be profitable than the other. So inverse risk/reward ratios are not in my opinion a good reason not to trade binary options.

 

BlueHorseshoe

[JMB 10]

Hi JMB,

 

As a general rule, all else being equal, you'll find that the larger your stop-loss the higher your win-rate. A risk/reward ratio of 10:1 where the stop is ten times the size of the target can push a win rate well above 80%.

 

Well,... All else being equal, a Risk/Reward where the stop is 10 times bigger than the target has probably caused for more margin calls than anything else. 80% win rate still means that you win 8 times and lose it all with 2 losses.

 

my

[addchild 10]

Let’s take this a bit further.

 

Let’s say that you see a nice trade in the EUR/USD and you take a short (sell) for example. You put your stop 20 pips above your entry and your target (in case you only work with one target) is 60 pips below your entry price. That is a positive Risk/Reward of 3:1. If you lose you lose 20 , if you win you win 60 pips,......Simple. You can actually lose 2 times this trade and win only one time and still come out ahead, but that’s not all. You can choose to close your trade whenever you feel, you can also close a part of the trade when you get to your target and look for a 2nd target and so on.

 

When you open a Binary option "trade" with let’s say $100usd and the payout is 81% they take your $100usd when you open this trade and pay it back to you when you win + the 81% on that $100usd. Many beginners at this will think that they actually won $181usd but we all know it’s just $81usd. Also when you open a binary option trade you have to wait it out until the hour (or whatever amount of time you choose) is over and get paid or loose. You have no saying over that trade once you are in. When you lose one trade you now have to win the other one to come out ahead, not to speak about a losing streak.

 

And then another thing. As you have probably noticed on all these sites this Binary Options trading is largely promoted to Forex traders as this is a very big retail group where 95% (if not more) of them are losing all their money, ....why would you think that is?

 

I know it all looks easier as you just have to bet (yes this is a wager on a derivative) on an up or down move but don't fall for it. Never take a trade where you can lose more than you can win, the only time in life when you would do that is when you buy a new car that drops in value when you drive it out of the showroom and where you will never get the same money back for it when you want to sell it

 

You have your concepts a little backwards,

 

First, $100 binary trade doesn't exist, that would be a trade with 0 probability of closing out of the money.

 

The neat thing about the fixed scale of 0-100 is that:

Probability ITM= total cost - fees

This means as long as your buying OTM (out of money) your risk reward is always in your favor. So if you add any sort of reasonable unfair coin of an edge, you can make money fairly easily.