I've been asked how I make money in Binary Options, and there have been others on the General Boards asking if it's possible to make reliable returns trading Binaries. I've decided to create this thread to refer people back to and so I can post progress updates.
First of all my basic strategy is almost identical to that posted by Tradesmart on his thread in this section, so apologies Tradesmart if it appears I'm treading on your toes a little.
Everyone’s looking for that “Holy Grail”, that secret bit of genius, that amazing combination of indicators that can predict the future and guarantee you the returns you’re looking for. Well, let me tell you that there are NO magic wands in trading. Success is less about the details of your strategy and far more about how you apply it in terms of your money management, discipline and your own psychological approach to the markets.
Of course, you need a strategy that works, at least to a degree, and I’m going to share mine here although it’s a simple, basic strategy that’s been seen on these forums before, but I’ll also disclose my trade/money management plan that has delivered consistent success for me trading real money in a live environment. This will not be for everyone! Some people think using a vast number of indicators and systems makes them feel like real traders. The only thing that makes me feel like a real trader is the balance in my account ;-)
The strategy you’ll have seen before, but please read all the notes to get the full picture. I’m a 20-year Forex trader, I only trade for a living, and I’m really loving this system.
OK here goes:
I have an FXCM demo account running Metatrader 4 and a 1 min EURUSD chart open. This chart has 1 indicator on it, Bollinger Bands with settings 20 and 2.5. I found that deviation of 2 creates too many false signals and deviation of 3 means you’ll be lucky to see more than 3 trades per day. I settled on 1 minute for the number of trades it offers during an average day and because the 5 minute offers no better ITM rate. I also have the Market Watch window open on the metatrader but I reduce the size of the box down so I can only see the EURUSD rate and the clock. It’s this clock that I use as my “countdown trigger”.
My trading account is currently with IQ Option. Their platform is excellent and execution is very accurate. They don’t play games with pricing either. I have also opened with IG in London.
OK as you will have seen elsewhere on the BOE Boards, the trading strategy is simply to take a trade in the opposite direction when a candle closes outside the Bollinger Bands, so if it closes out of the top band I enter a Put, and if it closes below the bottom band I enter a Call. As the Market Watch clock gets into the 50s on the seconds and if a trade appears to be lining up, I’ll hover over the Put/Call button and closely watch the clock and the chart so I can nail the trade the moment the candle closes. Expiry is 1 minute.
OK so nothing new there and we all know that it often works well but the ITM rate isn’t anything to write home about is it? So here’s how I use it to make money:
I avoid the period prior to London Open as there’s often a series of trades in the same (wrong) direction as the market gears itself up for the day, so I’ll normally look for the first trade from 09:10 UK time and I’ll then trade until about 13:15, picking up again around 14:30 after NYC Open to avoid another rush around that time and to give me a chance to enjoy some lunch without worrying about trading! For those of you trading Asian markets I’d avoid the “dead zone” and trade from about 02:00 onwards (again, UK time) when there might be enough movement to be able to make sense of this strategy.
OK this is the most important part of the way I trade and there are some important elements here.
For smaller trade size, just divide these numbers down as appropriate, keeping the same ratios between each trade.
My first trade is $100. If this trade ends ITM I make $82 and look for the next one, again at the starting level of $100
If the first trade ends OTM then my second trade on the next signal is $320. If this trade ends ITM I make $262 which recovers the original $100, also creates the original $82 of profit that the first trade would have made, and then makes a further $80. Again your next trade is at the starting level of $100
If the second trade ends OTM then the third trade is $512. If this trade ends ITM then it recovers the original $100 and the $320 but there’s no profit, we’ve just recovered the losses and we move on with the next trade at $100
If the third trade ends OTM we REPEAT the $512 trade. If this trade ends ITM we generate $420 towards recovering part of the losses made in the other trades.
These 1-4 trade sequences we call “events”. Most events will be only 1 or 2 trades, i.e. you will be making consistent strong returns most of the time.
When an event consists of 3 consecutive trades you will break even on that event and look for the next trade
When an event consists of 4 trades where the 4th one ends ITM you will subsidise your loss on the previous 3.
Some people can’t face the concept of a trade that doesn’t generate profit, but believe me I’ve run so many examples that this structure works best in terms of risk/reward over time.
When an event consists of 4 trades and the 4th one ends OTM you will take a “hit”.
Based on the above numbers the hit will cost you $1,444 at this level. When this happens you set the platform back to $100 and start again.
You have to be mechanical, disciplined, and not scared of the trade sizes to make this work, but believe me it does work in real, live trading environments.
Typically you will have an average of 1 full “hit” in a week and around 3 of the smaller 4-trade events where the 4th trade comes in ITM causing a smaller loss. The rest of the trades will end ITM on either the first or second trade so you are building up plenty of buffer funds to be able to take hits and carry on. One full hit in a week will take approximately a full day of trading to recover, leaving 3.5 – 4 days of the week to make money.
During the month of May I had a fantastic first week followed by 3 “average” weeks and ended up with $8,344 – real money, real trading. This week my trade size has increased to a $120 start with the others multiplied up to keep the ratios. I started with trade sizes of $20, $64, $100 and $100
Note: I have run this strategy where the trade sizes are larger at each step so that the profit on each trade in the event is $82 so for example on a 3-trade event the profit is $246 etc, BUT the “HIT” is much larger so the extra loss wipes away the extra profit.
I would also say that although you will make $2000 per week on this strategy at these settings you really need a $5000 account balance to safely do it because you need to be able to take 2 Hits and still be able to trade out of the situation, so if you have $500 in your account your first trade should be $10 etc if your broker allows. Please note that taking 2 hits will be so rare it might never happen to you, but to be safe, take your maximum hit and multiply by 3 and that’s your minimum account balance.
This entire trading approach is not for everyone. There’s a Martingale element but it’s not a Martingale strategy (which is the fastest way to blowing an account known to man!). I know the simplistic approach to signal generation and a relatively low ITM ratio overall will mean a lot of people won’t want to repeat what I’m doing but I was asked by some people how I make money from Binaries and this is my honest answer!
You don’t need charts that look like an accident in a paint factory to make money in B.O.
Good Luck/Good Trades guys.
p.s. If you don't like the BB strategy you can apply the trade size management principles to any strat that has a low number of occasions where you'll get 4 OTM in a row.
1. MM calculation xls sheet: https://www.dropbox....rds MM.xls?dl=0
2. Link to EA: https://www.dropbox....in_new.mq4?dl=0
3. Free VPN for 1 year: http://aws.amazon.com/free/?nc2=h_ls
tutorial 1: http://desaroxx.com/...-aws-cloud.html
tutorial 2: http://www.tradinghe...ing-amazon-ec2/