There are a few marketers pushing out binary trading systems to their email lists at the moment. I thought i'd create this section so we can discuss our experiences with commercial binary systems, or discuss our own binary strategies and tips for binary success.
What is binary betting?
I'm not an expert by any means on this and have only tried it out a couple of times but here is my rough guide based on my understanding....
Binary betting is often done through spreadbet providers although lately i have seen some specialist binary options / binary betting firms setting up.
In binary betting, price is quoted as a number between 0 and 100. The binary bet is settled depending on the specific bet terms, but here is an example:
EURUSD, end of day bet. If the EURUSD ends the day UP, then the bet settles at 100. If the EURUSD ends the day DOWN, then the bet settles at 0.
You can choose which direction you want to bet for that day, and you take the price quoted by the broker. For instance, at the beginning of the day you might get a quote looking like this:
This means if you want to bet on price ending UP for the day, you are entering your trade at 52. If at the close of trading the EURUSD is UP, then you win and the trade settles at 100. In this case if you betted $1 / point then your win would be $48.
As the day goes on the bet can change depending on the current position of the EURUSD. For instance, if later in the day the EURUSD has risen 100 pips/points, then it will be almost certain that price will end up having risen for the day. Therefore you would get a quote similar to this:
This means if you bet on the EURUSD rising for the day, and you enter at 99, betting $1/point, then you will gain $1! But, if the EURUSD has a massive reversal and ends up down, then you lose $99 instead. In the above earlier example where it was quoted at 48-52, the losses would only have been $52 (for a $48 payoff), so you can see how drastically the risk:reward ratios can alter with binary bets.
As with normal trading, you get a spread which you can see in the quotes. In my 48-52 example the spread is 4 points.
Most binary strategies i have seen to date seem to rely on catching big swings in the market late in the day when the odds are in your favour for large RR ratios. So in our 95-99 example, you can bet $1/point that price would drop and you'd only lose $5 if price settled higher, but would stand to gain a huge $95 if price swung back and dropped.
If anyone has any words of wisdom to add to what i've written above please do create a new topic so others can benefit from our shared knowledge.
Do be careful with binary trading - binary quotes can be VERY volatile, especially very short term bets (IGIndex do 5 minute binaries for instance), and also when price is very choppy around a single point and it's very uncertain whether or not the bet will end up settling at 100 or 0 - near expiration time it's not uncommon to see quotes swinging wildly from 5-9 to 88-92 or similar!