Binary options Pros and Cons You should Know

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Binary Options Robots: Pros and Cons

Binary options robots are indispensable assistants in trading, but they also have their own advantages and disadvantages, which experts from our forex magazine will talk about

In the issues of our magazine, we constantly discuss, create and research various Forex trading robots. Currency traders are already accustomed to the fact that trading on their own with a refined and structured trading strategy does not make sense, and sometimes even interferes with good performance. That is why skilled programmers trying the binary options market apply the experience gained in automated trading, and judging by the results our contestsDo this very successfully. However, robots for binary options – not the Grail, and their use has its own characteristics.

Binary Options Robots – Software Trading Assistant

So, if we are read by market traders who are unaware of trading robots of Binary Options, explain in a couple of words what it is. In fact, advisers are a software application that completely replaces the trader in the trading process due to the algorithm of opening, tracking and closing of transactions embedded in it. Using robots in trade is very convenient in all respects: they save time in anticipation of a long-term transaction, the trader can freely leave without worrying that he will miss a successful entry into the market; they protect the nerves of the merchant and save the human factor from trade; in some cases, if the terminal allows, the strategy programmed into the adviser can be easily tested on the history and finalized based on the conditions, etc.

There is also the option of software assistants in binary options trading. They do not completely replace the trader’s work from start to finish, but only help him open a deal on time by analyzing the indicators laid down in the strategy indicators, or vice versa, help to close in advance if the type of binary option and strategy indicators showed the opposite signal. One way or another, such semi-robots work as an attentive observer and suggest the best option for working out the signal, but do not make decisions for the player. This type of advisor is convenient when the strategy is not fully developed or other than technical analysis indicators uses fundamental factors. In this case, you can’t do without the participation of a trader, therefore, fully automatic robots for binary options he, in general, is not needed.

Where to buy or download a binary options robot

How to try such a trading assistant? The answer is obvious: either download for free binary options robots on one of the specialized forums or in the community of traders, or purchase it on websites or in electronic stores.

ForTrader.org Magazine recommends that you first find and try an adviser posted on the network for free. The fact is that the use of such software applications, one way or another, requires certain skills and knowledge, therefore it is better not to risk money, so as not to buy a “pig in a poke.”

The following advice that you should pay attention to for the same reasons: if you are not at all versed in automated trading or still have little experience working with them, try its work on a demo account!

At the time of buying binary options robots, pay attention to trade statistics provided by the seller on the site or in monitoring. How to use and correctly read monitoring on myfxbook is described in great detail in one of the articles of this issue. Choose your future assistant wisely, evaluating not only its results, but also the trading style that is possible drawdown and ease of use. Read reviews on the Internet in your future purchase, if possible, talk with someone who is already using this adviser. All this will add to your confidence in future results and save you from wasting time, nerves and money.

Cons trading robots for binary options

On the Internet you can find many articles on the minuses of trade robots for binary options. Among them you can find the statement that the trader ceases to think and follow the market, losing professional skills, and the idea of ​​frequent losses of the robot in case of a change in the structure of the market’s movement, and of the deceits that sometimes await the speculator when buying third-party copyright programs.

ForTrader.org magazine experts have been engaged and specializing in trading precisely advisors for so long that all these points seem even surprising to us. See for yourself. Trading even the most autonomous robot, a trader, whether or not he wants to, looks into terminal 3-4 times a day at least, checking what is happening there. At the same time, he analyzes the transactions opened by the adviser, especially if they give a negative result. Why? Because you always want to finalize something, to improve profit. Well, how can one lose a trading skill in such a situation? Unlikely! Of course, an important condition in trading a robot is a complete idea of ​​why and at what point your assistant opens a deal, otherwise we do not recommend putting such an adviser for real money. The Black Box is not our option. Next, let’s talk about losses due to changing market trends. You need to understand that a program is a set of conditions and actions that fully reflects the essence of your strategy. The robot does not add or decrease anything, because it does not know how to do it. If you are a good trader and trade clearly on TS, then in manual trading you will begin to lose money. Yes, you may notice a glitch faster if you buy binary options yourself, but this minus more than pays off the pluses that the robot received when you, for example, were sleeping or on vacation. But deception . If you clearly understand what you are doing, then it will not be easy to deceive you. That is why we advise you to understand the free advisers for BOs, and only then switch to commercial options.

What is the result? In the end, we recommend that you use robots for binary optionshaving gone through all the stages – from training to comprehensive testing or even a programmer. Those authors who have little experience working with advisers will find you a lot of excuses not to trade programs, because at the very beginning it is really not easy. Try to overcome laziness, and your efforts will pay off handsomely.

FORTRADER magazine experts

FORTRADER Magazine is a large team of experts in trading in financial markets. Traders, managers, investors, programmers, testers, technical administrators – we all work for you every day for many years. Sometimes we write articles together, then the whole journal becomes the author.

Binary Options Jargon You Should Know

The following are some basic, and not so basic, trading terms that you’ll likely hear as you enter the world of binary options.

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  • Binomo
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Call Option: An agreement between a buyer and seller that gives the buyer of the call the right to buy an underlying financial instrument at a specific price and time. In simplest terms, a call option is bought by traders expecting an asset to rise in value (above the strike price) before the option expires.

With traditional options, how much you lose or make is determined by the cost of the option (cost of option is the maximum loss) and how far the market moves above the strike price. With binary options, risk is limited to the amount invested, and profits are set at a specific amount regardless of how far the underlying asset moves above the strike price.

Put Option: An agreement between a buyer and seller that gives the buyer of the put the right to sell an underlying financial instrument at a specific price and time. In simplest terms, a put option is bought by traders expecting an asset to fall in value (below the strike price) before the options expires.

With traditional options, how much you lose or make is determined by the cost of the option (cost of option is the maximum loss) and how far the market moves below the strike price. With binary options, risk is limited to the amount invested, and profits are set at a specific amount regardless of how far the underlying asset moves below the strike price.

Underlying Instrument: An asset upon which an option is structured. Currency pairs, stocks and commodities are examples of underlying assets upon which options contracts are based.

At the Money: Refers to a situation in which an option’s strike price is the same price as the underlying instrument. For instance, if you buy an S&P 500 option with a 1500 strike price, and the S&P500 is currently trading at 1500, your option is “at the money” or “ATM”.

Refund: When the amount invested on a trade is returned to the client because the option expired at the money (ATM)–a rare occurrence.

Out of the Money: Refers to a situation where the strike price is above the underlying futures contract price for a call option, or below the underlying futures contract price for a put option.

If the S&P 500 futures are trading at 1500, a call option is out of the money (OTM) if the strike price is above 1500.

If the S&P 500 futures are trading at 1500, a put option is out of the money (OTM) if the strike price is below 1500.

In the Money: A position where binary options traders want to be in, as in the money (ITM) means the position is profitable. It refers to a situation where the strike price is below the underlying futures contract price for a call option, or above the underlying futures contract price for a put option.

If the S&P 500 futures are trading at 1500, a call option is in the money (ITM) if the strike price is below 1500.

If the S&P 500 futures are trading at 1500, a put option is in the money (ITM) if the strike price is above 1500.

Payout: The percentage return on our investment if end up ITM.

Digital or Binary Option: An option with fixed risk and payouts based on whether the trader correctly chooses whether a financial instrument will finish above (call) or below (put) a certain strike price.

Strike Price: A price accepted at the outset of the trade which will determine if you end up ITM or OTM when the binary option expires.

Option Expiry: The time at which an option expires; this could be 60 seconds or weeks from now.

Early Closure: The ability to close an option before the official expiry time. Not all binary options brokers offer this, and there may be some fee associated with early closures.

Expiry Level: The price of the underlying instrument at the time of option expiry. For example, if the expiry level is above the strike price of a call option, the option is ITM and you get paid.

Market Price: The current real-world price of the underlying financial instrument.

A Guide to Trading Binary Options in the U.S.

Binary options are financial options that come with one of two payoff options: a fixed amount or nothing at all. That’s why they’re called binary options—because there is no other settlement possible. The premise behind a binary option is a simple yes or no proposition: Will an underlying asset be above a certain price at a certain time?

Traders place trades based on whether they believe the answer is yes or no, making it one of the simplest financial assets to trade. This simplicity has resulted in broad appeal among traders and newcomers to the financial markets. As simple as it may seem, traders should fully understand how binary options work, what markets and time frames they can trade with binary options, advantages, and disadvantages of these products, and which companies are legally authorized to provide binary options to U.S. residents.

Binary options traded outside the U.S. are typically structured differently than binaries available on U.S. exchanges. When considering speculating or hedging, binary options are an alternative—but only if the trader fully understands the two potential outcomes of these exotic options.

Now that you know some of the basics, read on to find out more about binary options, how they operate, and how you can trade them in the United States.

U.S. Binary Options Explained

Binary options provide a way to trade markets with capped risk and capped profit potential, based on a yes or no proposition.

Let’s take the following question as an example: Will the price of gold be above $1,250 at 1:30 p.m. today?

If you believe it will be, you buy the binary option. If you think gold will be below $1,250 at 1:30 p.m., then you sell this binary option. The price of a binary option is always between $0 and $100, and just like other financial markets, there is a bid and ask price.

The above binary may be trading at $42.50 (bid) and $44.50 (offer) at 1 p.m. If you buy the binary option right then, you will pay $44.50. If you decide to sell right then, you’ll sell at $42.50.

Let’s assume you decide to buy at $44.50. If at 1:30 p.m. the price of gold is above $1,250, your option expires and it becomes worth $100. You make a profit of $100—$44.50 = $55.50 (minus fees). This is called being in the money. But if the price of gold is below $1,250 at 1:30 p.m., the option expires at $0. Therefore you lose the $44.50 invested. This called out of the money.

The bid and offer fluctuate until the option expires. You can close your position at any time before expiry to lock in a profit or a reduce a loss, compared to letting it expire out of the money.

A Zero-Sum Game

Eventually, every option settles at $100 or $0—$100 if the binary option proposition is true and $0 if it turns out to be false. Thus, each binary option has a total value potential of $100, and it is a zero-sum game—what you make, someone else loses, and what you lose, someone else makes.

Each trader must put up the capital for their side of the trade. In the examples above, you purchased an option at $44.50, and someone sold you that option. Your maximum risk is $44.50 if the option settles at $0, and so the trade costs you $44.50. The person who sold to you has a maximum risk of $55.50 if the option settles at $100—$100 – $44.50 = $55.50.

A trader may purchase multiple contracts if desired. Here’s another example:

  • NASDAQ US Tech 100 index > $3,784 (11 a.m.).

The current bid and offer are $74.00 and $80.00, respectively. If you think the index will be above $3,784 at 11 a.m., you buy the binary option at $80, or place a bid at a lower price and hope someone sells to you at that price. If you think the index will be below $3,784 at that time, you sell at $74.00, or place an offer above that price and hope someone buys it from you.

You decide to sell at $74.00, believing the index is going to fall below $3,784 (called the strike price) by 11 a.m. And if you really like the trade, you can sell (or buy) multiple contracts.

Figure 1 shows a trade to sell five contracts (size) at $74.00. The Nadex platform automatically calculates your maximum loss and gain when you create an order, called a ticket.

Nadex Trade Ticket with Max Profit and Max Loss (Figure 1)

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education How To Trade!
    Free Demo Account!
    Big Sign-up Bonus!

  • Binomo
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    Good Choice For Experienced Traders!

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