Monday, November 13, 2017

The Market Wants you to Lose Part 2

I wanted to go into more detail about what I talked about in my previous post. Forex is a zero sum game. Your losses are another persons winnings and vice versa. It also means you have to be better than at least some people. Generally, we can divide traders into 3 categories:

  • Large firms or very very rich individuals
  • Small firms or rich individuals
  • small time traders (probably you)
Most of the movement in the market is going to be dictated by the employees trading on behalf of large firms. These people have been trading a long time and know what they are doing. Small firms won't influence the market much, but generally are good traders as well. These two groups expect to consistently make money. Of course they won't always, but expecting to "beat" these groups in the long run would be tough.

The last group consists of small time traders. There is virtually an endless of new traders trying to make it big, and many of these people treat it like gambling. They trade based on their hunches or poor data analysis and end up losing money. These are the people we all can trade better then and how we can make money trading options. You don't have to be the best, just better than the average trader.

Lots of the strategies I use are in the tabs above at the top and the side bar or in the links below:

Thursday, November 9, 2017

The market Wants You to Lose

An important lesson I haven't talked about yet is EVERYONE wants you to lose money. More specifically the big market makers, but nobody trades to lose money. Pretty obvious but it has major implications you might not think about.


Let just say for example you had nearly perfect control over the forex market. What would be the best way to move the market to make money? Do predictable patterns? Try to be random? or maybe something else. What if you showed a pattern that you know would make traders enter but then reversed? This is exactly what happens, whether intentional or not. Here are some recent examples. (click to zoom)




On the right side of the chart, the NZD/USD looked like it would continue downward (and did). However, notice the huge pull back on one of the candles. If you entered on that candle since the downtrend was confirmed, you might have put a stop loss at either of the red lines. You would be stopped out and missed a lot of potential profit. Similar thing happened with the first uptrend on the left. How do you get around this? Set limit orders higher/lower than it appears price action would carry the trade. Some people call this "stop hunting" but the thing is it can be used to your advantage. Sometimes the pull back won't happen, but that's ok. You don't have to enter on every change of the trend. Make fewer, smarter trades. You don't have to be another trader that falls for the trap. At the very least, wait for a pull pack to the last  major resistance/support line. I used to get stopped out this way but now work with the market, not against it.

This idea is essential for making money at binary and standard options. More in next post.

Questions/comments?

Part 2 is found here




Tuesday, February 2, 2016

The Fundamentals of Most Binary Option Trading Strategies

Trading strategies can basically be split up into to 2 categories. Indicator based and visual based. Indicator based is where you have certain indicators on your chart and when they move certain ways, you enter the trade the way the indicator "tells" you to enter. When I first started binary options, I searched and searched for the perfect indicator that would actually tell me when and how to take the trade, but I never found it. Some people trade this way but I find it less effective than visual trading because of one key point: all indicators lag. This is especially critical in binary options where a delay in a matter of minutes to enter a trade could be the difference between finishing in the money or out of the money. In a later post I might talk about which indicators are the best and how to use them but I fine they really aren't very effective.

The second type of trading is visual based trading. It's using a basic chart and in its simplest form, drawing lines to predict how price will move(very scientific). More specifically, using previous low as values of support and previous highs of values of resistance. These values are where you want to enter trades as price has a good chance of reversing. This is also called price action. This can be explained a lot better in a chart example. Here is the 5min EUR/USD earlier today(sept. 17) with candlestick chart from freestockcharts.com

As you can see, price will often bounce off the same value more than once. Then when the price does fall and break the support level, the roll of the value is reversed (in this case to resistance). Now, price will bounce off it and go back down when price hits that value again.

Of course price won't always follow the support/resistance levels. However, the higher the time frame, the more likely there is to be a reversal. Price hitting a all time high is much more likely to reverse than hitting a 1 hour high. More on price action and binary options to come.

Price Action Part 2 found here