I refer to Forex Binary Options Tips as I mainly trade Forex these days. However, you will find that these tips, in relation to Binary Options Trading, are just as applicable to any other instrument as they are to Forex.
You will notice that many of the tips are quite different to those that others tell you about, that’s because these tips really are supposed to help you…
I have been investing in the Stock market and trading the Forex markets (the traditional way, not via Binary Options) with my own money for more than 20 years. I have in this time invested and traded most instruments you will be familiar with including commodities, stocks, indices and Forex. In doing so I experimented with many forms of trading such as futures, options, spread betting and fixed odds.
It was simply out of interest that I decided to explore the Binary Options form of trading Forex
It was quite an eye opener which is why I decided to share my Top 7 Forex Binary Options Tips, my Top Tip is the last one!
The following infographic is followed by a detailed version of each tip…
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Tip 1 – Beware Of That Binary Options Broker “100% Deposit Bonus” Offer
This is probably the most popular influencer used by Binary Options Brokers to get you to open an account with them. It is arguably the primary reason a lot of people open a Forex Binary Options Trading Account. Two thought processes are at work here:
- I double my money straight away
- If I lose half I can walk away and be no worse off
Just a minute…
This is subtle because at the beginning all is well. Open an account, deposit, let’s say £2,500, log in and Bingo!
You’ve doubled your money!
You’ve got £5,000 and now you are ready to make your Forex fortune. Here are the two likely outcomes…
- You win a little, lose a little. Eventually you end up losing a little more than you win. You end up back at your £2,500 Initial Deposit level and decide to call it a day. Time to withdraw your Initial Deposit.
- You get (very) lucky, double your account perhaps! You’ve made £10,000, a 300% return (remember you only deposited £2,500). £5,000 is a 100% return on your Initial Deposit, you can withdraw that and still have £5,000 left to do it all again, completely risk free. Time to withdraw half of it.
Did you read those Terms and Conditions in your haste to sign up for your Deposit Bonus?
Probably not! Well, if you had, you would have noticed that in order to make a withdrawal from your account (even from your Initial Deposit)…
“you must transact a turnover equivalent to 20 times the combined value of your Initial Deposit and your Bonus Amount”
Now, just take that in for a minute, here’s the maths…
You made an Initial Deposit of £2,500. You received a £2,500 Bonus Amount from your broker. The “combined value of your Initial Deposit and your Bonus Amount” is £5,000.
“You must transact a turnover equivalent to 20 times” £5,000. I will make it really easy for you. You must place bets worth £100,000 before you can make a withdrawal.
If you were a sensible trader and you were to risk 2% of your capital on each bet that would mean you would be risking £100 on each bet. £100 is of course 2% of £5,000. So, in order to make a withdrawal from your account you must place 1,000 bets.
1,000 bets is a lot!
Let’s say you intend to be quite active and place 10 bets a day. Assuming there are 20 trading days in a month it would take you 5 months to place 1,000 bets. Let’s say you intend to be less active and place 5 bets a day. Assuming you have some days off from your Forex Binary Options trading and some holidays it basically means it would take you about a year to place those 1,000 bets.
So, there you have it…
[notify_box font_size=”12px” style=”blue”]If you accept any kind of bonus offer from a Binary Options Broker you WILL NOT be able to make a withdrawal from your account unless you have placed bets worth 20 times your Initial Deposit AND the Bonus Amount you received.[/notify_box]
As you will find out, it is highly unlikely you will be around long enough to place that many bets…
Tip 2 – Do Not Be Fooled By That Binary Options Headline “Make 80% In 5 Minutes”
It is very true, with a winning Binary Option bet you can make 80% in 5 minutes or 1 hour, a day or even a week. This simply depends on 2 things…
- The time frame you choose.
- The return your Binary Options Broker offers for your winning bet – 80% is pretty standard, some offer more, some less.
Now, here’s what they don’t mention…
You only make 80% of the amount you bet. This means if you lose you lose 100% of the amount you bet.
Let’s assume that £5,000 account again and that you risk 2% (£100) each time you bet. This means that you will lose £100, or 2%, if your bet loses and that you will win £80, or 1.6%, if your bet wins.
Put some more perspective on this…
Each time you lose (meaning the broker wins), the broker makes 25% more than you. £100 is 25% more than £80.
Every bet you win you actually make 1.6% and every bet you lose you actually lose 2%
The most popular Binary Options bet is the Call/Put. As you probably know, this basically means you bet that the closing price of the market will be Higher/Lower (Call/Put) than the current price at the end of the period you are trading. This is not dissimilar to calling heads or tails on a coin flip. The main difference is of course, as already pointed out…
The broker makes 25% more than you every time he wins
You’ve probably already worked it out, this means in order to make a profit you will have to win this coin flip much more often than your broker does! How many times exactly?
This is best done by example so let’s stick with our £5,000 account and 2% (£100) risk on each bet. Let’s use 100 bets…
If you were to win 55 of your bets you would make a return of +£4,400. Obviously, 45 losing bets means you would incur a loss of -£4,500. This is a net loss of -£100 or, -2%.
You must win at least 56 of every 100 bets you place to make a profit. If 56 of your bets win you would make a return of +£4,480. Compare this with the 44 bets you lose (-£4,400) and it equates to a net profit of +£80 or, +1.6%.
To make a profit you must win at least 56% of all Binary Options bets you place
And, a reminder of why this is the case…
[notify_box font_size=”12px” style=”blue”]You make a return of 80% of your bet amount each time you win. You lose 100% of it if every time you lose. Compared to what you make when you win the broker makes 25% more every time you lose.[/notify_box]
Note: Although this may be acceptable to Forex Binary Options traders, traditional traders of Forex typically target a scenario where they make 200% of their risk each time they win, not 80%. This means they aim for a 1:2 Risk:Reward not 1:0.8. It is most unusual for any Forex trader to consider implementing a strategy with a Risk:Reward less than 1:1.
It’s really hard to beat these odds because…
Tip 3 – Do NOT Believe Anyone Can Regularly Forecast That A Market Will Close Higher/Lower Than The Current Price In 5 Minutes Time
In actual fact do not believe anyone can regularly forecast that a market will close higher/lower than the current price at the end of any period of time.
When you place a Forex Binary Options bet, assuming you are using the most popular Higher/Lower (Call/Put) bet you are betting that the market will close higher or lower than the current price in 5 minutes (or whatever time frame you are using) time. It is just not possible to accurately forecast this on a regular basis.
[notify_box font_size=”12px” style=”blue”]Nobody can regularly forecast that a market will close higher/lower than the current price in the next 5 minutes, 1 hour, 1 day or more – No more so than they can call Heads or Tails when tossing a coin in the air.[/notify_box]
We have tried so you pay attention…
Tip 4 – Do NOT Attempt To Buy Or Develop A Profitable Binary Options Trading System
Out of interest I asked my Meta Trader 4 (MT4) developer to test a number of basic Binary Options Trading Systems I had identified during my research…
Most systems were tested across 10 instruments including Forex, commodities and indices. 4 time frames were also tested, the 15 minute, 1 hour, Daily and Weekly.
That’s 40 tests for most of the basic systems identified…
Note: We tried, as best possible to ensure there were at least 100 “theoretical” bets but at times lack of back-test data was a restriction.
We checked a Bollinger Band based system – Place a Put (market will finish lower) bet when a candle closes above the Upper band and vice versa if a candle closes below the Lower band. The thinking here, price is extended, expect a retracement.
Result: 40 tests. No more than a 52% strike rate for any of the 10 instruments across the 4 time frames. We never had a failure rate below 45% meaning reversing this system would not work.
We then had a look at Daily Pivot Points (on the 15 minute and 1 hour time frames only, due to their intra-day nature). Place a Put bet (market will finish lower) if a 15 minute or 1 hour candle closes above the Daily Resistance Level 2 (R2) and vice versa if a 15 minute or 1 hour candle closes below the Daily Support Level 2 (S2). The thinking here, price is extended, expect a retracement.
Result: 20 tests. No more than a 53% strike rate for any of the 10 instruments across the 2 time frames. We never had a failure rate below 47% meaning reversing this system would not work.
Next up, a Simple Moving Average Cross system – Place a Call bet (market will finish higher) when the 10 Period (Fast) Moving Average crosses above the 20 Period (Slow) Moving Average and vice versa when the Fast crosses below the Slow. The thinking here, price is gaining momentum, expect it to continue.
Result: 40 tests. No more than a 53% strike rate for any of the 10 instruments across the 4 time frames except for EURUSD on the 15 minute time frame. We saw a 55% strike rate on this one test, the closest we got to an almost break-even system so far. Failure rate never breached 45% so reversing this system would not work.
We turned to an oscillator next, a system based on RSI – Place a Put bet (market will finish lower) if, on candle close, the 14 Period RSI is Overbought (it’s value is greater than 70). Place a Call bet (market will finish higher) if, on candle close, the 14 Period RSI is Oversold (it’s value is less than 30). The thinking here, price is extended, expect a retracement.
Result: 40 tests. No more than a 54% strike rate for any of the 10 instruments across the 4 time frames. We never had a failure rate below 47% meaning reversing this system would not work.
Now, a breakout system – Place a Call bet (market will finish higher) when a candle closes above the high of the last 12 candles. Vice versa, place a Put bet (market will finish lower) when a candle closes below the low of the last 12 candles. The thinking here, price is gaining momentum, expect it to continue.
Result: 40 tests. A 56% strike rate for 2 instruments on the 1 hour time frame…
Finally after running 180 tests we find 2 that would show a marginal return, 1.6% per 100 bets based on 2% risk per bet!
Failure rate never breached 46% so reversing this system would not work.
Lastly, a “7 Up Candles Will Be Followed By A Down Candle System” – Place a Put bet (market will finish lower) after the 7th bullish candle in a row closes and vice versa for 7 bearish candles in a row. The thinking here, price is extended, expect a retracement.
Result: 40 tests. No more than a 53% strike rate for any of the 10 instruments across the 4 time frames. We never had a failure rate below 47% meaning reversing this system would not work.
We did expand this to 8 candles (in a row) which resulted in a 60% strike rate for 2 instruments on the Daily time frame. We never had a failure rate below 45% meaning reversing this system would not work.
After running 260 tests we find 2 that would show a 16% return per 100 bets based on 2% risk per bet!
Note: Back test data restrictions and the scarcity of this set up meant that the 2 tests combined consisted of less than 100 bets. So infrequent is this set up it would take a lot of patience to use it as the focus of a Binary Options Trading System for serious traders. This is compounded by the fact the results are based on such a small number of bets.
You cannot buy or develop a profitable Binary Options Trading System to forecast that a market will close higher/lower than the current price at the end of any period of time.
[notify_box font_size=”12px” style=”blue”]260 tests. 6 different, well, 7 actually, systems. 10 instruments. 4 time frames. Only 2 with a decent strike rate of 60% (albeit on restricted results).[/notify_box]
Of course the above systems are quite basic but the back-testing highlights the difficulty of “systemising” the process of regularly forecasting that a market will close higher/lower than the current price at the end of any period of time.
You could perhaps mix and match these systems. You could, for example, wait for a candle close above the Upper Bollinger band and for the Daily Resistance level (R2) to be breached. Then place a Put bet (market will finish lower) on the thinking, price is extended, expect a retracement. We believe this would be futile on the basis one would end up constantly curve fitting, perhaps to the extent that trade infrequency would be so rare that back-testing results would not be sufficient enough.
It’s fair to say, based on this analysis, that a long term strike rate of 60% would be quite exceptional!
Consider this, this means you believe you correctly predict Heads instead of Tails many more times than not, 60% is actually 50% more times than 40%.
Still think you or anyone else can do it, read on…
Tip 5 – Do NOT Believe You Will Find A Binary Options Signal Service That Will Work For You
Before you consider any Binary Options Signal Service you should…
Ask for access to the live account
This should be at a minimum, a recent 12 month statement of all bets made. It’s also worth doing an internet search for reviews of the service.
Ensure bets are placed for a duration of 1 hour or more
Less than this and it will mean it will be almost impossible for you to react to signals and emulate the same results as the provider.
Ensure bet frequency is at least once, preferably twice a week
If there are less than 50 bets a year it is unlikely that the service will be profitable enough. For example 50 bets a year with an exceptional strike rate of 60% would equate to a return of just 8% based on 2% risk per trade.
This may seem OK but do also…
Check returns less fees
Let’s take the example above and as always assume our £5,000 account. A return of 8% based on 2% risk per bet equates to £400. So, if fees are £50 a month, that’s a net loss for you of -£200 (-4%).
If the service trades 100 times a year then this of course improves. The return increases to 16% which equates to £800. Minus fees you would end up with a net profit of £200 (+4%).
Perform a simple due diligence as follows…
- Are they trustworthy? Hopefully you have seen a live account statement and not found many (any) negative reviews.
- Can you emulate their results? Bets of at least 1 hour in duration give you a much better chance to react to and place similar bets.
- Are there enough bets? Less than say 50 bets a year does not really provide sufficient opportunity to profit, even with an exceptional 60% strike rate.
The final due diligence process is the most important…
Even if you believe the provider is trustworthy, you can emulate their results and there are sufficient bets, is it really worth it?
Let’s just use a few examples, using 2% risk per bet, an exceptional 60% strike rate and monthly fees of £50…
- £5,000 account, 100 trades a year = £800 a year. Minus fees that’s a net return of £200 a year, or 4%
- £10,000 account, 100 trades a year = £1,600 a year. Minus fees that’s a net return of £1,000 a year, or 10%
- £20,000 account, 200 trades a year = £6,400 a year. Minus fees that’s a net return of £5,800 a year, or 29%
Now, let’s put some balance on this…
How much capital would you entrust to a Forex Binary Options Signal Service? Would you entrust £20,000, the most likely answer is NO.
Perhaps you would be willing to take a punt and risk a £2,500 deposit with a £2,500 bonus, so £5,000…
We’ve already established the return based on 100 trades a year, after fees it’s 4%. So let’s say it’s 200 trades a year. 120 winners at £80 a time and 80 losers at £100 a time. That’s £1,600, so minus fees that’s £1,000 a year, 20%.
Would you seriously risk your money and pay those fees for a completely uncertain return of 20% per year on the basis…
- The provider will maintain that exceptional strike rate of 60%
- You will be able to react to and place every bet
Note: After making 200 bets, at least you should be eligible to make a withdrawal from your Binary Options Trading Account!
[notify_box font_size=”12px” style=”blue”]If you do the correct due diligence it is highly unlikely that you will find a Binary Options Signal Service that will work for you. Especially if you consider the potential risks associated with the potential return.[/notify_box]
Remember: These providers are most likely relying on a Binary Options Trading System. Our analysis has already determined that a 60% strike rate (really the absolute minimum one should consider) would be quite exceptional.
Onto the penultimate tip…
Tip 6 – Binary Options Related Websites Are NOT There To Help You
Binary Options related websites are only there to help themselves, NOT you!
Those Binary Options Broker Reviews…
Guess which one will have the best review! Usually the one the website owner gets the highest commission for.
Those Binary Option System Reviews…
Guess which one will have the best review! Usually the one the website owner gets the highest commission for.
Those Binary Option Signal Service reviews…
Guess which one will have the best review! Usually the one the website owner gets the highest commission for.
Most, if not all, Binary Options related websites want just one thing…
They only want YOU to open a new Binary Options trading account or sign up to a system or signal service using one of their affiliate links
Buy a system using one of their links, chances are they get 50% from the system provider.
Sign up for one of the signal services using their links, chances are they get 50% from the signal service provider.
Sign up for a new Binary Options broker account, they get AT LEAST 50% from the Binary Options Broker.
Happy days!
You are happy…
You’ve got access to the system or signal service you bought. Or, you’ve got your new Binary Options Trading Account and your “100% Deposit Bonus”!
The website owner is happy…
By you buying a system or signal service the website owner has their share of the money, YOUR money. They care not about you now, nor whether you win or lose, not one bit!
By signing up for a new Binary Options Trading Account the website owner also has his share of the money, YOUR money. And, once again, they care not about you, nor whether you win or lose, not one bit!
The Binary Options Broker is happy…
If you’ve bought a system or signal service you’re going to bet (and eventually lose).
If you’ve signed up for a new Binary Options Trading Account the broker knows you will…
- Lose your shirt and give up on Forex Binary Options trading. No problem, they’ve got YOUR MONEY
- Lose your shirt and make another deposit, probably enticed by some email offer for another bonus or even a phone call – Then lose your shirt and potentially, finally, give up. No problem, they’ve got EVEN MORE OF YOUR MONEY
Here are some standard incentives Binary Options Brokers offer these “helpful” websites…
- 1 – 20 new customers a month, 50% of each customers Initial Deposit
- 21 – 50 a month, 60%
- 50+, 65%
[notify_box font_size=”12px” style=”blue”]Binary Options related websites DO NOT exist to help you. The vast majority, if not all, exist for one reason, to help themselves.[/notify_box]
Binary Options Brokers love new customers…
They know you are going to “lose your shirt”. You cannot win and, assuming you signed up for a Deposit Bonus, it is highly unlikely you will survive long enough to bet enough to qualify to make a withdrawal.
That’s why Binary Options Brokers can pay up to 65% (sometimes more) to affiliates for a great review or recommendation and a flow of new customers.
Finally, my Top Binary Options Tip of all…
Tip 7 (My Top Tip) – Do NOT Open A Binary Options Trading Account
My 7th and Top Forex Binary Options Tip. If you’ve gotten this far you have hopefully already decided not to open an account, if not, read on…
This is about my own personal experience when venturing into Forex Binary Options trading. As I mentioned previously I refer to Forex as that’s what I mainly trade these days. These tips are just as applicable to any other instrument as they are to Forex.
My journey started here…
I did not want to trade a demo account as I have never been a big believer in them. So, I signed up for a real Binary Options Trading Account with, probably the largest broker I knew of (I cannot mention their name as they threatened me with legal action (more on this later) but their first name is very similar to “Bank”).
I completed the online application without a care for the Terms and Conditions and made my Initial Deposit. This was £250 at the time, their minimum.
All went smoothly with the application and I was soon logged in and good to go…
Without any system I went to place my first bet just to see how it all worked. I was informed, on screen, that in order to place my first bet I had to verify my account by sending, via email…
- A (scanned) copy of a recent Bank account statement
- A (scanned) copy of a recent Utility bill
- A (scanned) copy of my current Passport or National ID
This was not in their Terms and Conditions
This company, based in Cyprus, insisted on these documents before I could even place my first bet. I politely told them that I WOULD NOT AND COULD NOT send such private information to them, especially via email. It’s Cyprus! No way!
They insisted on the information so I sent them an email and politely, once again, informed that I wish to use my account but I cannot provide the documentation they requested. I was informed that I could not place a bet until I did so.
OK, fair enough I thought. I told them I would like to close my account and that I would like them to refund my Initial Deposit in full. The next email I received was to tell me that in order to make a withdrawal I had sent them, via email…
- A (scanned) copy of a recent Bank account statement
- A (scanned) copy of a recent Utility bill
- A (scanned) copy of my current Passport or National ID
This was not in their Terms and Conditions either
It’s fair to say there was an exchange of at least 10 follow up emails when I knew I would get nowhere on my own. I got in touch with my bank and told them that basically I had been scammed by an offshore “financial” company based in Cyprus. They told me it was against standard procedure but they would perform a Debit Card recall on the transaction. They did also tell me that it could be blocked by the receiver and that my funds would not be entirely safe for 2 months. Well, luckily for me this period elapsed and I got my money back.
Without giving up your private data (via email) you will not be able to place a bet or make a withdrawal from your Binary Options Trading Account
What happened next really was amazing…
The next email I received from the broker told me they were now going to take legal action against me as I was a debtor to them. This was because I was obliged to deposit the minimum £250.
Once again, this was not in their Terms and Conditions
After at least another 10 emails I just started ignoring them. They stopped contacting me. I am assuming that their threatened legal process has stopped too!
[notify_box font_size=”12px” style=”blue”]This is a simple illustration of how confident Binary Options Brokers are that you will “lose your shirt”, that once they have your money, it’s as good as gone.[/notify_box]
I believe it was only my persistence and perhaps luck that meant I didn’t lose my Initial Deposit even though I lost a great deal of time and some sleep. I am sure many others have lost more than I did and others will continue to do so.
Hopefully YOU will not and perhaps a few others too will not after reading these tips!
For sure I will not be testing my will or my luck again with Forex Binary Options Trading and in particular any Binary Options Broker.
Note: There are now some legitimate companies such as IG Index offering Binary Options trading. Remain wary of any company registered anywhere where financial regulation is not as rigid at it could be, e.g. Cyprus.
Bonus tip…
Bonus Tip – Binary Options Trading Account “Identity Theft” Could Become A Reality
Now, this is just a rumour making the rounds at present but it does have some substance. With all these personal details on file in a country where financial regulation is not as rigid as it should be, there is surely some danger!
It concerns me ever having to email a photocopy of any of my personal details but when it’s a “full set” I am even more concerned. These companies have details of hundreds of thousands of individuals across the globe. Not just copies of their passport, but copies of their utility bills and their Bank statements!
[notify_box font_size=”12px” style=”blue”]It really is not inconceivable to imagine a “break in” intentional or not, physical or electronic, where all that data is suddenly stolen. Is it?[/notify_box]
Hopefully these Forex Binary Options Tips That Nobody Tells You About save you some wasted time and money. However, the most important thing here is not the time and the few hundred quid, it is that “identity theft” scare becoming a reality in the future.
Had similar experiences or got any comments? Save others time, money and the potential risk of identity theft by sharing them below…
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