Did you know most people who trade pick the right direction?
This is how it works.

You turn your computer on, pull up some charts, watch and read about market updates, and then pick a direction you think the market will go.

You could be studying stocks, commodities, bonds, indexes or FX, it doesn`t matter. The thing is to pick the right direction.

Most people are very good at this and often pick the right direction more than they get it wrong, so why are most people not millionaires?

The problem lies with managing the trade when it`s open.

These could be the reasons:

• Stop loss order in the wrong place
• You move your stop loss order too soon, when you are showing a slight profit
• Not understanding the laws of probability
• Exiting your trade before it hits your stop loss order
• Exiting your trade at break even after you were in a minus position
• Exiting you trade for a small profit because you think it`s going to turn against you

Analysing the market you’re trading is the easy part, having the self control, discipline and mental strength to stay with your opinion is not.

The sad truth is most traders will never overcome the psychological side of trading and that is why we don’t see more millionaire traders.

So what’s the answer? Do we walk away from trading?
Because most people are pretty good at picking the market directions, what if I asked you, “Where will your chosen market be in one hour from now?”

Lets pick the EUR/ USD, it could be the S&P500/Dow Jones, or Google/Apple stock, or even Gold/Oil, it doesn’t matter, but let’s stay with EUR/USD currently trading at 1.3984 (1st Nov 20100).

Check you charts or listen to the news and do you think the price will be lower or higher than 1.3984 in one hour’s time.

That means if you are correct by just 1 pip you win. You do not have to be 20 or 30 pips in front, just 1 pip and you win.

But the main attraction of this type of trading is once the trade is placed, you cannot do a thing to change the outcome. You’re either right or wrong, no closing the trade early, and all the other problems we highlighted that makes most traders unsuccessful. And do you know what, because you cannot alter the trade, it’s far easier to accept, you just win or you lose.

Binary Options

Options can be a little difficult to understand and put off a great deal of traders, but Binary Options are a fantastic starting point to trading options.

If you trade a 1 hour Binary Option, this is how it works.

The price of the EUR/USD is currently at 1.3984 (1st Nov 20100).

If you think the price will be higher than 1.3984 in 1 hour, you select a Call.

If you think the price will be lower than 1.3984 in 1 hour, you select a Put.
Let’s look a little closer.

This Option here is a 1 hour option that is offering a 70% pay out if you are correct. The percentage of the payout changes with different options. You could be offered an 80% payout on some options or a 60% on others.

The simple fact is you just have to be correct by just 1 pip/point to win.
You can see that from your $100 investment the return would be $170.

If you pick the wrong direction and lose, most of the time you do not lose the full $100 but around 90% of it, so you risk is $90 for a reward of $70 With this level of risk to reward ratio, it means you have to be correct 57% of the time to come away with a small profit.

If you trade an 80% payout, that reduces the time you need to be correct to 53%, very close to just spinning a coin, without any of your knowledge and skills in selecting the right direction through the techniques of fundamental analysis.

This type of trading is seeing a surge in popularity over the last few years. You can now trade all different time frame options, from as low as 15 minutes.

Look at the chart below. Will the price be higher or lower from where it is now, (1.3931) in 15 minutes, 30 minutes, 1 hour or 4 hours?

Binary Options Compared to Conventional Trading

From our example earlier, the option was for 70%, $100 option with a payout of $170. If you were to risk the same amount in the conventional method of trading, you would have to divide the amount you’re risking by the size of your stop loss.

In this case, the risk was 90% of $100 = $90
To make sure your stop loss order was far enough away from the current price action, you would be looking at having your order 20/30 pips away. If you use 30 pips, divide this into the amount you are prepared to risk ($90) and it will come out at $3 per pip.

To make the same amount of profit the Binary Option offers, your chosen direction would have to move +24 pips minimum.

In this next example of the JPY/USD, the payout is 73% ($173) in-the-money option and 95% ($5) out-of-the-money.

This next example is using a $30 Option with a payout of 68% for in-the-money and 90% for out-of-the-money.

If you have a system that produces higher that 60% win ratio, trading Binary Options could work out very profitably.

Happy Trading
David Curran

P.S. These are links that you might find helpful

1) Binary Options 101 – Home Study Course:

Binary options 101 will introduce you to the world and characteristics of binary options trading showing you how to get started, avoid trouble, use smart trading money management and discover secret systems that can allow you to make potential incredible money almost every single day in binary options trading http://forexavenger.com/phr.html

2) Binary Options Trading System STRIKER9 – Light- v.1a:

90% Accuracy Binary Options Trading System (Light Version) Trades only 1 hour a day http://forexavenger.com/phr2.html

3) Binary Options Trading System STRIKER9 – FULL:

Striker9 Pro. This is the Pro/Full Version of Striker9 that has been able to produce mind blowing system results.
http://forexavenger.com/phr3.html