What Is The Truth About Trends in Binary Options Trading?

Binary Options Trends are made easy by knowing how and where the financial marketplace will lead. Trends are what all binary and forex traders look for and try to decipher.

I gave you a little insight on how Binary Options Made Easy works in my first article, now I will dive a little deeper into the aspects of this exciting trading Platform.

One Hour Options, as they are called, can be viewed as a financial market instrument while traders have a versatile approach without the problems involved while executing regular “vanilla options” as they are referred as.

Whether or not you are looking for a short term projection of your binary options trend or hedging your trades, trending can help you obtain higher payouts in a shorter trading period. This way of forecasting trend movement is achieving recognition with traders worldwide. Forex binary traders are being drawn in by the simple to use binary platform and they can be in and out of a trade in less than 30 minutes.

These All or Nothing Options are available in a wide range of underlying assets such as Indices, Commodities, Currencies (Forex market) and Stocks. No matter if the trader has taken a call (rise in price) or put (a decline in price), the contract has a time period in which the trader has to be correct with regards to the vision in direction of the underlying resource cost, then they will be in the money.

But on the other side of the coin if the trader has picked the underlying asset incorrectly then the trade will stop out of the money. Many binary options companies are starting to use what is called a “roll over”. That is when if you think your binary options trade will finish out of the money you can roll your wager over to the next hour and pay a fee in order to continue the trade.

Being able to easily pick out the trends in Binary Options Trading is what it is all about. Since many times you only have one hour to make your decisions you need to better understand what trending is all about. Since we are making Binary Option trading easy to see the direction in which any commodity can move you need to focus on the short term strategies. Binary Options made easy can give you a better understanding of why the Options markets move as they do.

There is a reason, now all you have to do is learn the principles of good money management, the ease of the binary platform and strict control of your emotions and you are on your way to making some great money. But be forewarned if you are looking to do this full time treat this as a business and not gambling.

The Riskiest Option Trading Strategy Known to Man

Today, I wanted to discuss the riskiest Option Trading Strategy known to man. I am going to go through the strategy and then I am going to give you the names of two other strategies that you will want to stay away from because each one of them is using the risky trade within the strategy. So, let’s get started.

The Option Trading Strategy with the highest risk to an investor is known as selling naked calls or short a call. How this strategy works is as follows:

1. You find a stock you think will not have much upside nor volatility, aka SPECULATING. This should be your first indication that this strategy should not be used.

2. You sell a call naked (this means you do not own the stock, but, you are obligating yourself to selling this specific stock sometime in the future at a predetermined price.)

3. You receive a premium (meaning someone is paying you to have the right to buy the underlying stock, that you do not presently own, from you sometime in the future.)

4. Now, this is where this strategy can get UGLY!! READ BELOW

Selling naked calls (short a call) is gambling. You receive a premium from an investor that gives him the right to buy either from the market or from you, whomever is cheaper. Consider the example below.

You sell one (1) naked call on ABC stock at a strike price of $20. The buyer of your naked call pays you $3. (Alright, you just made $3 per contract, or $300.00)*

The current market price of the stock is $15.

Sounds good so far huh? You have $300 and the stock would have to move from $15 to above $23 ($20 strike price plus the $3 premium) before the person holding the call option would come to you and have you buy the stock at the market price and sell it to him for $20. Well, just to let you know, because there is no ceiling on how high the price of the stock can climb, your risk is UNLIMITED!!

Let say you wake up one morning three weeks into the future and find out the stock that was trading at $15 back when you sold the naked call just spiked up $50 per share. Well, guess what, the person that bought the call from you is doing? He is outside banging down your door to get you to sell him the stock at $20, so he can sell it in the market at $65. What an ugly predicament you are in now. You have to buy the stock at $65 and turn around and relinquish it at $20 leaving you with a loss of $42. (Your cost of $65 minus what you sold it for $20 equals $45. But remember, you were already paid $3, so your loss is $43 per share or $4300.00) OUCH!!

Now granted, this is an extreme example, but it is better to just stay away from selling naked calls so you don’t end up on the wrong side of a run away stock while you were sleeping. Get my drift.

Well, hopefully you understand the risk involved in selling naked calls now, here are two other option trading strategies to avoid like the plague:

short straddle: short a call and short a put

short combination: short a call and short a put (combination will have different strike prices, i.e. sell a 20 call and sell a 30 put)

* One (1) contract equals 100 shares of stock, therefore if you receive $3 per contract, you will receive as a premium $300.00.

Ryan Watts Emini Trading Program Review

Ryan Watts E-mini Trading

I started trading index futures back in 2004. My first year trading the ES (S&P E-mini) contracts was a long year for me as I was essentially gambling and I am a terrible gambler.

Fortunately, in 2005 I stumbled upon Ryan Watts and his Scalping the E-mini Futures & Forex learning program. I can not begin to tell you what an eye-opening experience it was for me. If only this program was known to me in 2004 it would have saved $1,000’s of my hard-earned dollars.

Having personally traded using Ryan Watts’ day trading system I think I can give a fairly non-biased review. Mr. Watts is a trader first and a teacher second and he uses these techniques everyday to scalp the ES (e-mini S&P), the YM (e-mini Dow) and he also trades the foreign exchange market (Forex). What you get with the Watts Trading consists of three parts, first being the e-book with charts examples and setups, second being the progressive flow exercises, and last but definitely not least you get lifetime access to the live trading room.

* The e-book gives you a detailed look at the mechanics of his process, the steps used to prepare for each trading day, and an outline that will help you stay focused in the work of your trading. All of the tools that Ryan makes use of are shown in the e-book with detailed information on each.

* What you get with the progressive flow exercises is a detailed step by step process that you will use to progress as a trader. Traders ought to gradually progress as their skills improve and that is what these exercises are all about. You can move along at your own pace and build the confidence you require to succeed.

There’s also lots of other useful pages on the Watts Trading Group page on yahoo groups. Chart templates are provided there as well which makes things much faster when you go to setup your charts. There’s also some.pdfs that helped me tweak my charts and make minor adjustments in my order entry. There are also suggestions from fellow traders from the trading room who like to share their knowledge as well and will lend a hand, too. One document that I found particularly useful was Mr. Watts’ explanation of the stages of cost action. It was great to see the way that he views the market and what cost action is all about.

I highly recommend Watts Trading for someone who desires a nice scalping strategy whether it be for Forex or index futures.

When I first bought and starting it, I found the live trading room the very useful. Mr. Watts is trading this exact process everyday so you can see his live charts as well, which is helpful to see some real example trades. In the event you need any assistance or have questions he has always provided it and will show you what criteria to use to take trades or pass on them.

Mr. Watts will also answer any questions you have about his trading process if he is in the trading room or always by e-mail. This is what helped me recover from a funk and make serious strides as a trader. Do not expect Mr. Watts to give calls because it is not a calling room, but will go over his trades after the fact. Trading the same market as Mr. Watts and when I took the same trade as him it helped boost my confidence.

Once you learn to trust yourself and the indicators (signals), you will find trading profitably and consistently a reality.

You can get more information by going to Watts Trading.

May your next trade be profitable.

Trading Options – Good Or Evil?

You have probably heard people refer to options as a risky enterprise, akin to gambling. And it is true that options trading can be very risky, especially when engaged in with minimal knowledge and preparation. The average stockbroker or financial planner does not have sufficient options knowledge to guide you in the use of options in your portfolio. But that doesn’t mean options cannot play a role in a conservative portfolio of stocks.

The majority of today’s options trading volume derives from institutional money managers who use options to protect their clients’ stock portfolios. They are using options as insurance. Options may also be used to boost the income that may be derived from a conservative stock portfolio.

Options written on stocks are referred to as equity options and come in two forms: calls and puts. A call option gives the holder of the option the right to buy the underlying stock at the strike price of the option at any time before expiration. A call option is similar to a grocery store coupon for a five pound bag of flour at an attractive price; but the coupon is only good for 30 days and is limited to the purchase of one five pound bag. Similarly, a call option gives you the right to buy 100 shares of stock at a specific price and it is only good for a particular period of time.

Put options are opposite in character to calls and are more like insurance; a put option gives the owner the right to sell the underlying stock at the strike price of the option any time before expiration. Put options are often purchased when one expects a stock to decline in price, or it could be used as a form of insurance if I already own the stock; if my stock declines in price, my put option appreciates and compensates for a portion or all of that loss. An excellent analogy is house insurance; if I pay my insurance premium January 1 and nothing happens to damage my house this year, my insurance expires worthless, just as my put option will expire worthless if my stock just continues to appreciate. But if a hurricane damages my house during the year, my insurance pays for some or all of the repairs. Similarly, if my stock declines in price, my put option will increase in value, replacing some or all of the loss in my portfolio.

Equity options expire on the Saturday following the third Friday of each month. It is common to hear or read that equity options expire on that third Friday. While that isn’t technically correct, it is true that Friday is the last opportunity to trade those options. Saturday expiration was established to give the Options Clearing Corporation and the brokerages time to settle their customers’ accounts before the options technically (legally) lose their value.

Consider the hypothetical company, XYZ, as an example. XYZ closed May 28, 2009 at $34.70; the June $35 call option was quoted at $1.00 at the close. In the options quotations on a site like Yahoo Finance, you will see bid and ask prices posted. The Ask price is the price quoted if I wish to buy the option, while the bid price is what I would have to pay to sell my option. Options are quoted per share of the underlying stock, but are sold as contracts that cover 100 share lots of stock. The XYZ June $35 calls are quoted at an ask price of $1.00. Each contract is priced at $1.00 per share of the underlying stock; since each contract covers 100 shares of stock, the contract costs $100 and five contracts would cost $500. I have the right to exercise my options anytime before they cease trading on Friday, June 19, and buy 500 shares of XYZ stock at $35 per share or $10,500. Or I could simply sell my call options at the bid price anytime before expiration.

Options can be used in several very conservative ways in a stock portfolio. For example, if I own 300 shares of XYZ, but I am concerned this market is softening and may take another dive downward, I could buy three contracts of the June $35 puts at $1.40 to protect my position. This put position would cost me $420 and protect me through June 19. As XYZ drops in price, the puts will increase in price, compensating for some or all of my loss on the stock. This is called a “married put” position. However, there is no free lunch in the market; if XYZ trades sideways or upward, I will lose my $420 of “insurance premium”.

Another conservative use of options is the “covered call” strategy. If we continue with our example of XYZ and I think the stock is going to trade sideways or slightly up over the next few weeks, I could sell three contracts of the June $35 calls for $1.00, bringing $300 into my account. If XYZ is trading unchanged at $34.70 on June 19, the $35 call options will expire worthless, and I will have gained $300 or 2.9%. But if XYZ trades upward of $35, my maximum gain is capped at $330, or 3.7%.

Options trading can be very risky when used in a speculative manner, but options may also be used in conservative fashion with a stock portfolio, both protecting the downside and also increasing the income from the portfolio.

Trading in Gold and Silver Commodities

Trading in gold and silver is speculative in nature which means it involves a higher probability of risk but a substantial profit opportunity as well at the same time. Gold and Silver trading becomes viable when there is an economy crisis or downfall in share market. Though trading in commodities is relatively easy but it is kind of riskier trading and you may lose all your hard-earned money if do not trade with strategy and planning.

Majority of people think that investing in commodities, like Gold and silver, is a form of gambling due to its speculative nature. But speculation should not be considered a pure form of gambling as speculation too need a proper strategy to execute a plan and making a decision. Therefore bullion trading can be categorized as hedge trading with speculative nature which is adopted as an alternative to stock trading as a strategy of hedging against inflation and economy crisis.

Commodity trading is based on futures trading so there is no need of exchange and delivery of physical commodities. It also gives you an extra option of margin payment in which you pay only a fraction of whole payment of the contract. Hence trading in commodities like Gold and silver becomes viable to improve your portfolio. This is why more and more retail investors are now turning gold and silver as an investment option.

Though trading in gold and silver provides an opportunity to earn a lot from this market but lack of knowledge and volatility of price movement may result in a loss of wealth at the same time. These precious metals are traded with high volumes as big investors plays the real big role here and as a results, the swings becomes more volatile and unpredictable. So small and retail investors should be careful while investing in precious metals. Remember the lesser you are good at knowledge and experience, the more are the chances of loss. Trading in a commodity market is influenced by supply and demand cycle and inventory. This is also one of the major obstacle to track the direction of the market as availability of this demand and supply information is not as robust as equity market. Therefore keeping an eye on these factors to predict the future price becomes necessary to avoid unnecessary losses.

How to Keep Yourself Updated-

Keep an eye on the global commodity market. Stay connected with news websites providing latest updates and data for the commodity market. Many research advisory firms are there which provides daily research reports for the data of demand and supply along with the market prediction. They also generate commodity trading tips after conducting detailed study and research on these commodities. And these tips are provided to their clients through various mediums like SMS or email.

Conclusion-

Although trading in gold and silver commodities throws up an opportunity to earn significant profit but this involves substantial risk also. Experts with adequate knowledge suits this market the best. So make yourself fully prepared before entering into this risky trading segment.

Is CFD Trading Like Gambling at the Race Track Or Casino?

When people first hear about trading Contracts for Difference it is not uncommon for gambling to be associated in the same conversation. Today we going to have a look at the opportunities that trading Contracts for Difference presents and remove the idea of gambling from your vocabulary altogether.

Do you trade CFDs like a gambler?

The reality is you could trade CFDs like a gambler by trading at excessive levels of leverage. If you trade your account at more than 7 to 10 times your account size then I would suggest you are gambling. This means if you had a $10,000 account and you took total positions of $70,000-$100,000 then you are leveraged way too high.

You see the product of CFDs is only as risky as the person who was trading the account. For example, you could trade your $10,000 CFD account and have total positions that do not exceed 2 to 3 times your account size and this for many would-be trading well within their means. The trick with CFDs is to start very small and build your way up.

Make sure you are trading a positive expectancy trading system

A positive expectancy trading system simply means that for every dollar you risk you expect to make that dollar back and earn a little bit more. You see the casino is very smart and they have a number of positive expectancy games that are in favour of the casino and not the person playing. This means that the longer you play at the casino the more you should expect to lose.

When it comes to trading the way to remove the gambling like nature is to ensure you have a positive expectancy trading system. This is the one element that differentiates trading from gambling at the casino or the racetrack.

Can you afford not to become the casino owner?

Over time, your goal as a trader is to develop several positive expectancy trading systems enabling you to trade different market types over different time frames enabling you to in effect be the casino owner with several casino games. This will ensure your long-term profitability and enable you to reduce your drawdown’s considerably.

Tips from taxi drivers will not suffice

Another way to identify whether your CFD trading business is gambling or not is to work out if your trading tips are coming from taxi drivers, gym instructors or next-door neighbours. If the majority of your entry signals are generated from hot tips then it’s probably a fair indication that you don’t have a trading plan.

Spend quality time developing a robust trading plan

When you first starting out it is important in any business to have a well laid out and clearly defined business plan and trading is no different. When building your CFD trading plan you need to take into account your entry, exit, risk management strategies and run through several possible contingencies that could happen.

As you can see creating success with CFDs is a result of building a sensible trading plan and ensuring you have a positive expectancy trading system.