Is Binary Options Trading Riskless?

The above question is popped up in the minds of many individuals who wish to try their luck. Although this is not a new concept, still the people give it a second thought whether to choose it for the investment. Indeed, it is true.

Everyone knows the market. The values have been continuously shuffling among the upper, middle and lower levels. If today, the trade market is at the top layer, there is no guarantee that it will stick to the same position tomorrow or not. The binary options trade is also its chunk, and it will also be affected by its shifting. This is the primary reason that the people are afraid to step in into this business.

As a matter of fact, this trading is quite different from the conventional trading. Both are executed with respect to the market, but the process is diverse. The binary option trading is the trading that has been carried out within a specific allotted time. Once the time is out or expired, the trade is completely closed, and consequently, the trader will get either the profit or be in the loss. On the flip side, the conventional trading has the distinct method.

Some secrets associated with this trading are discussed here. Scroll down to know in detail.

Key Points of Binary Option Trading

If you are a beginner in this field, then first know about all the protocols, benefits and the risk factors of this business. It is better to acquire all the associated information regarding this trade, rather than to repent later. Moreover, there is another option for the newbies. They have to gather the information about the status of the market every minute. And, this relevant and essential data is given by the experienced market professionals, who have deep knowledge of the market conditions. They study every detail about the market, varying from the current market trends to the political circumstances and then give the right binary options trading signals in the form of crucial advice. These values depict that either a person can get everything or certainly nothing. In the nutshell, they help the traders to adopt the right steps according to the market.

But, you have to pay those professionals to procure the relevant signals. After this, you do not need to sit at the front of your computer screen and learn the market trends.

The best part about this business is that there is no requirement of any prior experience. Just invest in it and you will acquire the gain or the failure. However, there is a complete risk when you contribute your money in this business, but, still, more and more persons are inclining towards it. Why? The reason is that it is the most reliable and advantageous mode to earn. With this factor, there is also a specific limit of loss. So, you can feel relax to a certain extent. Actually, it all matters choosing the binary option strategy. If it is feasible, then you will surely win.

Day Traders

In the world of finance a trader is defined as someone who buys and sells financial instruments like stocks, commodities, derivatives and bonds in the capacity of an agent, speculator or hedger. A day trader, then is a trader who specializes in buying and selling these instruments within the same trading day. Trading begins and ends with the opening and the closing of the markets and may include a few or into the hundreds of orders per trading day.

Day traders belong to one of two groups, institutional and retail. A trader who is an institutional part of the equation works for a financial institution like a bank an has access to many resources, tools, and equipment, not to mention a large amount of capital with which to trade. They can trade continuously throughout the market day since they always have fresh fund inflows at their disposal.

On the other hand, those on the retail side of things use retail brokerages and trade with their own capital. It is easy then to see how institutional day traders have a certain advantage over their retail counterparts.

If you have ever watched the market you will know that it goes up and down throughout the day. World events have a lot of influence on which way the market will go. They are trained to take these little price movements and make them into something big, like big profits for their clients. When you are only trading within a day period the experts say that the more volatile the market is on a given day, the better a day trader will do. If the market is flat or not moving much on a given day, the opposite is true, and a day trader may not be able to work those great deals.

To be a day trader you need a certain know how of the markets, and the proper equipment, tools and insight to trade the right platform every day. The successes go to those with the most information on any given day. Traders also have to know when to move, when not to move and when to get out of a trade which can be a thrilling experience or one fraught with stress and panic, especially with a new trader.

Trading is a tough world to get into and is one that is often associated with burnout among its members. You can win big or lose big, it’s all in the markets and how a trader works them.

What Markets Should You Use for Your Portfolio?

A couple of years ago I made a fundamental mistake: until then I had my portfolio focused mostly on index futures markets. For years I have had with this approach really nice results. But that year, I experienced how frustrating it can be, to go through a couple of periods when index markets are underperforming. That was when I have decided to work really hard and improve my intraday portfolio composed of automated trading systems (ATS).

Smooth equity isn’t just about the systems – it is a smart combination of markets, timeframes, trading approaches, and, later on, also innovative position sizing. When you think about it, there is the logic behind it.

Even though in times of financial shocks and surprises there is barely any negative correlation in the markets, there are still some markets which live their own lives – and they offer us smart way for diversification.

The result is that when one of the market groups is not doing well, there is another, which compensates the losses from the first one – and makes the equity overall smoother.

What market groups you should use

This is the first question – what markets groups you should combine in order to get the desired result – smooth equity.

We have following futures groups: Index, Currencies, Metals, Energies, Bonds, and Grains. Every market group lives its own life and you can find at least one noticeable market in every group that can represent the whole group.

Personally, I have experimented with all groups and, besides currencies, I can highly recommend any combination. The currencies are, from ATS point of view, highly unstable (for example in Forex, ATS are failing really fast and it is really difficult to find profitable ATS for Forex). It also depends on how many markets you create a system for, and how many markets you trade with your account. But even with rather a small account, you can trade 3-4 markets. For such cases, I would recommend following combinations:

Combination of 3 markets (pick one market from each market group):

Index
Grains
Energies

Combination of 4 markets (pick one market from each market group):

Index
Grains
Energies
Bonds

Nowadays, I trade several portfolios that are based on the 4 groups mentioned above. Here is an example of one of them (breakout strategies, 30-minute chart, 5 markets, equity for the last 8 years, trading 1 contract per system):

The net profit for all 8 years and all markets combined is 421,548 USD and the max drawdown is just 12,315 USD.

Smoothen the equity by using multiple timeframes

The second way how to smoothen your equity curve (in a combination of trading several markets from different groups) is using several timeframes for every market (ideally without changing system parameters, or with just small changes).

It is more like a final touch than smoothing the equity, but it brings up an interesting idea that it might be better to add new timeframes instead of trading multiple contracts in the same timeframe. Another option is to optimize also the timeframes (check the results of your system on several timeframes and pick one timeframe for each market – it can, but doesn’t have to be the same) – but then, we need to ask ourselves how much of over-optimization this is.

Anyway, here is another example of the portfolio mentioned above, when for every market we add the second, 15-minute, timeframe. The equity is slightly smoother, the drawdown hasn’t increased so much, but the profit has.

The net profit is 812,457 USD and the drawdown is 18,815 USD.

What systems to use

The best variant is to have in a portfolio both trend and also counter-trend systems. Still, it is sufficient to have a system that can smartly react on both situations (equally, if possible).

I am specialized in breakout strategies and I can say that it is all you need to have a balanced portfolio across several markets – but only if you have systems trading both long and short. Sometimes you just need a simple breakout strategy that doesn’t have great performance (that you wouldn’t trade individually), but in combination, you have a nice portfolio with smooth equity curve. You need to constantly focus on the performance of the portfolio – it is more important than the performance of underlying systems. Remember when there is a huge drawdown for one market (system), the others can compensate that and you can still make a profit.

For that, you need to have a quality workflow setup how to create new and new strategies, as you will need a lot of them and for several markets. At the same time, it is crucial to have a setup of robustness testing procedures so that we can add to our portfolio really robust strategies.