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Timing Binary Options Entries

 
  
   Today I want to talk about Timing Binary Options entries. A lot of questions I get in my box center around timing your entry of a binary option. I want to try and answer these questions here based on my experiences trading binary options over the  past decade. I also want to start laying the ground work for conceptually how we will be trading on 0-100 based binary options sites like Nadex or cantor exchange in the coming months.
 
3 core rules for timing my binary options entry
 
     These rules help me to adapt to what kind of binary options signal I am trading and what I am expecting from the market. Now let me caution you to expect the unexpected when trading but chance favors the prepared trader because we fear the unfamiliar as human beings so following a familiar plan and set of fundamental rules will most likely help your psychology as you are trading.
 
Binary Options Timing RULE #1: When trading with the trend look for pullbacks before your entry. There is a popular fundamental trading theory that the prevailing long term trend will continue after a market consolidates ( Range trades for a while ) or retraces to test some previous support or resistance levels. Now I call this a theory because in reality the markets can do any and everything but what we do know is that the markets are made up of people. People trade around these theories and this means they often become self fulfilling prophecies.
 
      So this means that when I get a trend based signal I am going to assume the prevailing trend is moving in the direction of that signal but I want to tip the odds as much as I can in my favor so I will be waiting on my numbers the higher the better inside or above my expected range on a PUT or the lower the better or BELOW on a CALL.
 
Binary Options Timing RULE #2: When I have longer to wait before the binary options broker's lockout then I take that time because all it means is that I might get in better positioned and my money is at risk for LESS time because there is a defined exit time getting smaller as I wait for a better position when using an EU style Binary options broker. Even when I am trading a contrarian or counter trend signal in a perfect world I want the market to have as little time to move against me as possible and that is why I wait and that is also why if you look at our Binary options signals results you will notice that contrarian signals are for just 10 minutes and they are only sent out in the last few minutes before when most EU style Binary options platforms will lock you out of the trade.
 
Binary Options Timing RULE #3: OK This is more like just a simple fundamental rule that we keep in mind even when we are designing a strategy and lets call it the T.C. concept.
 
T: Prevailing trends need time to develop so I generally want longer term signals to agree with the trend on EU style brokers. Let me touch on a 0-100 options based broker here also because if I am trading with the prevailing trend I want there to be TIME for that TREND to develop. This might mean that I take an OTM ( Out of The Money ) strike price that has more time for the market to continue the trend and work for me.
 
C: Counter trend or Contrarian trades Can turn on you so on an EU style broker I generally want to be in and out in less than 10 minutes. OK lets talk about 0 - 100 Binary options like Nadex and in that case I want to be purchasing a deep ITM option with as little time to expire as I can find. Deep is kind of subjective so lets say deep is a binary option where the market is trading between 80 - 90 percent of the range between the strikes on a price ladder. Deep also means time wise as well so 90% of the time in that option or more should be gone as well.
 
Lets look at a Trade based on a Binary Options Signal from our service incorporating these rules
 
    
       So first thing is that I am going to endeavor to get in as high as I can inside or above the suggested range as long as there is time left for me to do so before the lockout on this PUT trade. No one can predict where the market is going to go but that is not what I am doing. When I get longer term trend signals I look at the distance between the suggested range's numbers in pips
 
EURUSD PUT Suggested Range 1.3139 - 1.3129 = 10 Pips
NOTE: In my mind I am not worried about the pipettes and I know we can win by 1 pipette but I am focusing on pips to get me in the mind set of bigger price entries in my favor. The range here was 10 Pips so what is deep in this range? 80 - 90% so 8 or 9 Pips is deep. I might not see it before lockout or I may see it in the next 5 minute candle but I have an idea of the type of action I am looking for on this forex Pair
 
OK now psychologically this can be taxing for 2 reasons
 
1. While you are waiting on something that may never come you get to thinking: What if I miss my chance to get in on a winning trade? Well there are trades all the time you don't miss trades you miss trades you could have gotten a great entry on and the only way to know if that is possible is to wait and see. Suggested ranges are an important part of your plan and sometimes you can even beat them getting in above them on a PUT and even LOWER than the suggested range on a call and all just because you watched the charts and picked your spot patiently.
 
2. You are looking to do a PUT but watching the markets move in the other direction. I know that kind of sucks and can make you say why am I trading down as the market is going up? You just need to think about this as a retracement back up to previous highs as the markets get ready to continue the prevailing trend down in this example. So if the trend does start moving back in your favor you have the trend on your side again plus you were selling into a market everyone else was buying at the time. Remember statistically a majority of short term traders are not profitable trading so maybe it is not so bad to step away from the crowd and wait on a good position for the longer term prevailing trend to resume hopefully if things go as planned like theory supports.
 
3. OK now lets look at the chart with some lines plugged in around the suggested range that I mentioned earlier for this EURUSD signal that our service sent out on 7/17/2013 
 
[CLICK] image to Zoom In/Out EURUSD 5 M 07172013 Results
Blue Line = Highs of the suggested range 1.3139
 
Yellow Line and Arrow = Where you can get in the range on the same 5 minutes and that is where our binary options signals results are calibrated based on regardless of if you could have gotten in higher and won by more pips applying the rules just covered.
 
RED Line = This is the highest you could have gotten in inside the suggested range before most EU brokers lockout time and that is a solid pretty deep entry.
 
Magenta Line = this is the exit at the start of the candle expiring on the half hour.
 

[CLICK] image to Zoom In/Out EURUSD 5 M 07172013
 
     So there you have it an example of all the rules I just mentioned laid out visually on a chart when the market does obey conventional theory. Also you will notice on that chart that in the next 5 minutes the markets popped huge and broke our little short term resistance line and you can see that it became the new support line after the markets wicked hard right on the line at 12:50GMT. I hope this helps explain Timing binary options entries in a way that opens your mind to some ideas to help you improve your trading.
 
Warmest Regards:
Alfred

 


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