Binary Options Trading Strategies

Option Builder – Binary Options Trading

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Option Builder – Binary Options Trading

Once you have gained a little experience of the markets, you will begin to understand how trends work, and which trades are the most profitable for you. In this instance, you may feel as though certain trading platforms are rather too restrictive for you, and that your knowledge of the markets could be better served through more specific trading. For just this situation, many platforms have introduced the “Option Builder” trade option which allows you to customize your own contracts and thereby maximize your potential profits. Although this may sound like a confusing prospect for newcomers to binary options, for those with more experience, this is the next step in making more money from your trading.

What can you customize?

There are three main aspects to the Option Builder trade option which you can customize and control. The first, as is the case with all binary options, is whether you wish to Call or Put. This is the most basic decision of any trade, as it establishes which direction you believe the market will move.

After this, the next customizable factor is the length of the contract or the expiry time of the trade. This is something experienced traders greatly appreciate, because this is often the most important aspect off the contract. People like to develop their own trading methods and techniques, and each person prefers to trade over a different period of time. Some prefer quick, exciting, 60-second contracts, whereas others feel more comfortable speculating about the fate of a market over the course of a few hours, days or even weeks. The Option Builder trade option allows each person to create contracts which suit their preferred method.

Finally, this trade option allows you choose your own risk settings. Risk setting management involves altering how much insurance versus payout you want. If you are sure of a market and the direction that the price of the asset you have selected will move by the expiry time you have selected, then you may wish to sacrifice insurance returns in exchange for a higher profit, whereas others may feel more comfortable increasing their insurance on a contract and settling for a lower potential profit. This is something advisable only to veteran traders who feel comfortable with manipulating their trade insurances, as this is a complex system which could lose amateurs a lot of money, or at least reduce their potential profits. These three factors make up the Option Builder trade option which is available on nearly all trading platforms.

When should you use them?

As has been previously stated, this Option Builder trade option provides the opportunity for extremely customized trading. Those who are unfamiliar with the finer details of risk settings and timeframes should refrain from using these resources until they have a bit more knowledge of the markets. More experienced traders, however, especially those familiar with the patterns or trends of a particular asset, would benefit greatly from this service. It would allow them to customize a contract specifically designed for their trading needs, and would therefore enable them to profit the most from their binary options trading.

Binary Options Trading Strategies

Using Time Horizons in Investing

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Using Time Horizons in Investing

For investors to avoid “bad luck” arising from poor timing of investments, they may want to consider using time horizons in investing. Stories have been told about employees who invested in their employer’s stocks only to get peanuts from their decades of biweekly savings due to a stock market crash. Others invested all their savings in equity mutual funds over a period of decades. Unfortunately, a market crash occurred just when they were about to retire; diminishing their nest egg significantly. In both cases, the would-be retirees were forced to continue working past their retirement age.

The Importance of Using Time Horizons in Investing

To prevent such problems from occurring, investors need to have time-bound investment goals. In the early stages of the investment plan, the investor’s portfolio should consist of aggressive investment vehicles, but towards the end, there should be more liquidity and less risk. That said, having time horizons is very crucial in investing. The following are three time horizons commonly used by investors and portfolio managers.

Short-Term Time Horizon

This time horizon covers a five year period. When investing, risky investments are avoided because there is very little time to recover from losses. For instance, no investment is made in the stock market. Investors who have a short term view only invest in cash like investment vehicles such as short-term certificates of deposit and money markets funds. Towards the end of the five year term, the whole portfolio should be in cash.

Intermediate-Term Time Horizon

This horizon spans 5 to 10 years. Investors can afford some degree of risk exposure in the stock market. A combination of bonds and stocks is very popular during this time horizon. Investors can invest in balanced mutual funds, which usually have a mix of both bonds and stocks. Bonds should mature before this term expires. Alternatively, they should be liquidated together with the stocks in the market.

Long-Term Time Horizon

In this time horizon, spanning 10 to 15 years, investors look for the greatest rewards. Investors can recover from losses in the stock market, so they can invest in well chosen stocks for the greatest returns. Bonds and cash-like investments can also be included in the portfolio. The order of priority in asset allocation should be stocks, bonds and cash investments. However, towards the end of the term, the portfolio should have more cash than stocks and bonds combined.

The Best Approach for Using Time Horizons in Investing

Investors can make time bound investments on their own. For instance, in the long-term time horizon, the investor can buy mutual funds and hold them for a number of years, then cash out and buy balanced mutual funds, which are usually much more liquid and less susceptible to market volatility. The financial services industry has also created products to cater for the needs of conservative investors. The products have varying asset-allocation formulas depending on the time-frame specified by investors. Assets in the portfolio of the investor are shifted year after year to ensure that the investor will have ready-cash and zero risk to volatility of the market; which is the main objective of using time horizons in investing.

Binary Options Trading Strategies

How to Avoid Going Broke After Retirement

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How to Avoid Going Broke After Retirement

Today people are living much longer in retirement than ever before. That is why it is essential to ensure that you have enough set aside in order to retire comfortably. By planning properly you can ensure a happy, comfortable retirement. There are multiple options to ensure that you will not go broke once you retire. It is important to know how to avoid going broke after retirement.

Budget Realistically

Once of the best ways to ensure that you will not go broke during you retirement is to budget appropriately. In order to do this it is important to assess monthly bills when considering long-term income including social security as well as your pension. This should all be done before retirement in order to understand your necessary living expenses. Once you understand what your monthly expenses will be you then can plan events in your treatment such as cruises and country clubs.

Retirement Accounts

When planning for retirement you should consider your accounts. If you have both a taxable retirement account as well as a Roth IRA then you may be able to take income from the taxable accounts. This means that you can draw an income from the accounts that will impact the amount of income tax that you would have to pay on the money. This would allow your Roth accounts to continue to grow as you use them. This is a great strategy as you can use these accounts to occasionally take out a large amount to make pay offs. This also means that you will not find yourself in a higher tax bracket based on your income for the year.

Get Rid of Debt

One of the best ways to ensure that you do not outlive your retirement is to pay off debt before you retire. This means ensuring that you do not have a mortgage payment or car payment that will equal the amount of money you have coming in. If you find that you do not have enough money to wipe out your debt upon retirement then it is recommended to refinance in order to guarantee your retirement.

Insurance for Long-Term Care

If you do not have insurance then you will definitely want to consider long term care insurance. The need for long term care could potentially wipe out any savings you have accrued and could ruin retirement. The cost of long term care is astronomical and is only on the rise. It is important to consider what insurance you will have as well as premiums for long-term care and if it is worth the cost.

Insuring that you have enough money to live comfortably in retirement is important. By consulting with your financial adviser on how to avoid going broke after retirement and taking these considerations in mind you can rest assured knowing that you will not run out of money during retirement. Keep in mind that there are also ways to make money during retirement including investing and trading options.

Binary Options

Is Your Portfolio Beating its Benchmark?

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Is Your Portfolio Beating its Benchmark?

When you receive a periodic statement of your account, it lists the investments in your account and shows their value on a particular date. You may have individual stocks, mutual funds, or other investments in your portfolio. A statement is a good way to know where you stand at a particular point in time. However, a static statement does not tell you anything about the performance of your investments. Are you in the right investments? Is your portfolio beating its benchmark?

What are Benchmarks?

Performance benchmarks are used to compare how well your investments are doing relative to the average performance of similar types of investments. Stock investors may look to the S&P 500 Index as a measure of the performance of the broad market. There are many more narrow benchmarks for different sectors of the economy. For instance, if you have a portfolio of technology stocks, there is a specific index that provides a benchmark to measure how your portfolio of tech stocks is performing relative to the overall technology sector.

Why are Benchmarks Important?

Suppose you decide to buy a portfolio of five different technology stocks and hold on to them for a year. After a year, you notice that your investments have increased by 12 percent.

It is always good to see a positive return, but is your portfolio beating its benchmark? If the technology sector went up by 20 percent for the year, you would have done better by investing in a technology fund that mirrored the technology index. On the other hand, if you happened to pick five winners while the technology sector as a whole only returned 2 percent for the year, you know that you did well.

Different Investments have Different Benchmarks

You know the saying that you have to compare apples to apples and oranges to oranges? Well the same is true when comparing investments. In a bull market, if you have a very conservative portfolio consisting of utilities and low-risk, dividend-paying stocks, you cannot expect to earn the same rate of return as if you were invested in more aggressive stocks. If you put your money in bonds, you have to compare it to the performance of other bonds. You can’t say that you did poorly because the S&P 500 Index of stocks was up 15 percent while you’re safe and conservative investments only returned 3 percent for the year.

Making Investment Decisions

A benchmark is just a guide that tells you how well your investments are doing over a specific period of time. It can be a useful tool when you are evaluating the composition of your portfolio of investments, but it cannot tell you about the future performance of those investments. If the answer to the question: “Is your portfolio beating its benchmark,” is yes, then you are probably on the right track. If the answer is no, it is time to look more closely at your investments, and maybe make some changes.

Binary Options Trading Strategies

Calculating Risk and Reward for Beginning Traders

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Calculating Risk and Reward

If you are interested in getting started with different investment opportunities, it is important for you to understand what options you have available in terms of markets and systems. Not all types of investments will immediately appeal to all types of traders. Sometimes, traders may not be interested in the prospect of a larger payout, so long as it means that they have a smaller, but steadier profit margin available to consider. On the other hand, there are also other traders who are only interested in working with high risk investments because of the enormous potential profits. Calculating risk and reward is one of the most important things that any beginning trader must learn to do, as doing so will help them make smarter investment decisions.

Retail investors will have a more difficult time during the investment process, especially because they may end up losing much more of their own personal money. The largest reason for this is that some investors simply are not familiar with how to calculate risk and reward, and then work with the appropriate calculations, making them a larger part of their investments. Understanding both can be as simple as understanding the direct relationship between both risk and reward. The higher the potential reward, the more risk there will be involved in the final equation. Calculating these relationships can be performed by looking into the numbers, including initial investment and potential payoff.

For instance, if your initial investment is fifty dollars, and you may potentially earn one hundred dollars after the appropriate period, the risk and reward ratio is two to one. The prospect of the one hundred dollar reward will be more enticing for you to put down the fifty dollars as an initial payment. This continues in direct, appropriate mathematical calculations, where a one hundred and fifty dollar reward to the fifty dollar initial placement will count as a three to one risk reward ratio. Making calculations like this one a regular basis will help you determine whether or not a certain commodity or investment will be worth the risk. Depending on the market in which you are investing as well, individuals can expect for such ratios to differ according to timing and rate. While such fluctuations may occur, the initial calculation will be a large part in determining whether or not the investment is worth it.

The stock market, in particular, is a good place to practice working with such mathematical procedures. Calculating risk and reward, and incorporating it on a regular basis in all of your investments will help you create a more prosperous trading profile. Remember to always go at your own pace, however, as all traders must learn to become comfortable with varying degrees of risk and reward before they finalize any trades. Think about what type of trader you are and how comfortable you will be with certain investments over others.

Binary Options Trading Strategies

9 Misconceptions about Managed Futures

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Some investment experts claim that the best thing you can do now is to invest in managed futures. There are many theories about this investment option but there are many inconsistencies too. Personally, I have discovered 9 misconceptions about managed futures and these misconceptions are discussed below.

1. It worked in the past so it must work now

This is one of the most popular misconceptions about managed futures. Those who push this theory claim that history has a habit of repeating itself. That may be true but history does not ever repeat itself in exactly the same way. In any case, we are talking about a dynamic market here. No two markets can ever be the same so what worked in the past may not necessarily work in future.

2. Managed futures is the ultimate win-win

Nothing can be further from the truth. Like any other investment, some people will make profit, some will lose money and some will just break even. In effect, managed futures can be a win-win, a lose-lose or a win-lose.

3. Many people invest in it so it must be good

If you keep your eyes wide open, you will notice that the numbers do not mean anything. If many people take the wrong option, this will not make that option the right one. Many people can invest in good options and many people can invest in bad options. It is not the numbers that determine a profitable venture.

4. Managed futures help you diversify

This is not true because you can diversify in different ways. Buy stocks in different industries and invest in mutual funds. These are just two ways to diversify your portfolio and there are other ways to diversify.

5. The managed futures manager knows it all

An investment manager is not a magician and the managed futures manager does not know it all. These managers are human and they make mistakes. When they make mistakes, you lose money.

6. Managed futures have attractive returns

The problem with this statement is that it is ambiguous. Different people have different meanings of what “attractive returns” mean. What the manager considers attractive may not be attractive to the client.

7. Managed futures can protect you from a stock market crash

When the market crashes, your investment may be reduced to worthless pieces of paper. This applies to stocks and bonds. It also applies to an investment called managed futures.

8. Managed futures are closely monitored and regulated

In many instances, this is not true. Managed futures operators have a lot of wriggle-room. For one thing, their accounts are not audited as often as they should be. Again, some managers may invest in high-risk ventures to make money for themselves and their clients.

9. Managed futures managers go by the book

The problem here is that nobody seems to know the “book” futures managers are supposed to use. For all you know, these people may be investing your capital in sports betting. If they win, everybody is happy but what if they lose?

Final Word

There is nothing wrong with investing in managed futures because you can make a lot of money with this option. The thing is that there at least 9 misconceptions about managed futures and these misconceptions have to be corrected.

Binary Options

Understanding Commodities: The Portfolio Hedge

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Understanding Commodities: The Portfolio Hedge

Among the most valuable pieces of advice that most beginning traders can benefit from is to diversify their portfolios. All investors are strongly encouraged to cover as many bases as they can in order to ensure that they do not have to worry about any negative trades affecting them too heavily in the long run. Some of the most widely considered types of investments that interested investors can make revolve around commodities. Commodities: the portfolio hedge, is a common title for numerous publications that revolve around helping traders establish more fulfilling portfolios with the addition of numerous different commodities. Investors are strongly encouraged to work with a variety of different commodities in order to provide their portfolios with the hedge necessary to help avoid sharp shortfalls in the future. While one of the most difficult to work with things about commodities is the fact that they are inherently risky, this is also one of their best features in terms of alternative investment strategies.

Many professionals believe that because the performance of these commodities does not immediately correlate with that of equities or any other fixed income sources, they can help lower overall risk. The small percentage allocated to natural resources can be a solid way to plan ahead, and lower general risk for the long term. People who to be more diverse in their trades will be better off working with such hedges for the future. Unlike stocks, which can sometimes be much easier to value because of the understanding surrounding the company, most of the growth plans for commodities can be unknown unless extensive attention is paid to certain indicators. Things like gold and silver are based almost entirely on principles of supply and demand, which can sometimes be very difficult to determine accurately. Certain economic events can help point investors in the right direction, but it is this uncertainty that helps them remain useful in the long run.

Slowly, as global markets begin to improve, commodities: the portfolio hedge, will stand a better chance of helping people benefit from their trades in the long run. Growth oriented assets, in particular, will emerge much more powerfully in the future, where base metals such as copper, tin, and aluminum. With such longer term growth in mind, investors are strongly encouraged to purchase at least a few commodities so that they can begin diversifying their portfolios for the future. Much like with any other part of the investment process, all traders are strongly encouraged to buy only according to what they can manage in accordance with risk and personal considerations. Not all commodities will be able to provide the same advantages, and it can be difficult to plan ahead in such an unclear market. However, by carefully considering supply and demand indicators, traders will be able to make efficient purchases that can help them hedge against risk in the long run.

Binary Options Trading Strategies

An Overview of Quantitative Analysis

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An Overview of Quantitative Analysis

While people think of investing as a logical pastime, the act of trading is fraught with emotions.  People often let their emotions get the better of them when trading, and it rarely ends well.  There is a way to avoid this emotional baggage however, and it is called quantitative analysis.  In case you’re interested in ridding emotions from your trading, I’ve put together this overview of quantitative analysis so you can get to know it better and decide if it is something you could use in your own trading.

Quantitative Analysis Basics

The quantitative analyst doesn’t spend time figuring out the fundamental prospects of a company.  They are unconcerned with product launches, management teams, or market share.  Instead they use pure mathematics to determine the proper investments.

Thanks to computers, quantitative analysts, or “quants” as they are known in the industry, can process huge amounts of data and create highly complex trading strategies.  They often use the smallest bits of data to identify patterns and then use those patterns to pull profits from the markets.  All of the data crunching is done using publically available data, so in theory anyone could build an investing strategy using a quantitative approach.  All that is needed is the necessary mathematical skills to parse the data and identify patterns that lead to profitable trades.

Advanced Quantitative Analysis

While the patterns identified are often used to locate profitable trading opportunities, that isn’t the only reason for quantitative analysis.  It can and often is used to minimize risk as well.  This involves using risk measures such as the Sharpe ration, standard deviations, beta and alpha to identify investments with high returns and minimal risk.  The theory is that investors should not have to put their capital at risk if it isn’t necessary.  So, when comparing two investments with similar returns, the quant would always recommend the least risky investment based solely on the numbers and mathematical prediction.

One good example of the quantitative analysis based portfolio are those based on risk parity.  This type of portfolio makes decisions that are based on market volatility.  As volatility in the market increases, the portfolio decreases risk taking, and when volatility goes back down the portfolio increases the risk taking investments.  These types of portfolios can become very complex, including not only stocks, but also bonds, cash, commodities, currencies, and derivatives.  In fact, many hedge funds are run using strategies developed by their own in-house quants.

In Conclusion

In the real world many strategies combine quantitative analysis with fundamental analysis to make trading decisions.  Initial identification of possible investments is done using a quantitative method, while the final decision is made after a thorough fundamental analysis of the asset in question.  There are also those who identify investments with fundamental analysis and then use quantitative analysis to limit risk.  The bottom line is that both methods do not need to be used exclusively.  Hopefully this overview of quantitative analysis has prompted some curiosity on your part and you will look deeper into the benefits of this emotionless trading method.

Binary Options Trading Strategies

Trading USD/JPY Profitably

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Trading the USD/JPY Profitably

In forex, there are dozens of currency pairs that are available for trade, but one of the most popular is the USD/JPY.  In fact, it is the second most traded currency pair, with only the EUR/USD being traded more heavily.  For this reason, among others, it is a good idea for both new and seasoned traders to consider trading USD/JPY.  It has good liquidity, is a stable currency pair, and tends to trend in a predictable manner, making its movements fairly easy to predict.

The USD/JPY is also known as the “gopher”, though this designation is rarely used when discussing the pair.  When looking at the exchange rate between the two currencies, the USD is the base currency, and the JPY is the quote currency.  Thus, if the USD/JPY is quoted at 100.00 it means that 1 USD is equivalent to 100 JPY.

The Japanese Yen became quite strong in the 21st century as many traders chose to buy Yen and sell other currencies.  This was known as the carry trade, and it became popular because traders could borrow Yen at very low interest rates and use it to invest in currencies with higher yields, pocketing the difference.  The Yen carry trade is no longer as popular as it once was, but with the low interest rates persisting in Japan and the probability of U.S. interest rates beginning to rise, it is quite possible that the carry trade will be resurrected in the fairly near future.

When looking at the price history of the USD/JPY you will notice that it tends to move in very well defined trends, making trading USD/JPY an ideal beginning point for new traders.  It also tends to have a low daily average movement, so it is a fairly safe currency for new traders.  Also of note is the interest shown in this pair by binary option traders, who can profit handsomely even with small daily movements in the pair.  With the trending nature of the USD/JPY, it can be quite easy to spot these trends and profit by using binary option trades.

Though the USD/JPY was influenced for many years by the carry trade, this trend has come to an end, and the pair has moved considerably higher since.  A good reason for this move has come from the Bank of Japan itself.  This central bank for Japan has come to the conclusion that the Yen needs to be weaker relative to other currencies if the Japanese economy has any chance of growing more robustly, and they have actively been working to weaken the Yen.  This has led to an increase in the USD/JPY and this upward trend is expected to continue for the foreseeable future as the Bank of Japan continues to weaken the Yen in an effort to spur inflation and economic growth.

When beginning with trading USD/JPY, the trend should always be followed, as this pair trends so reliably.  New traders must also remember to use stop loss orders to protect their trades, as well as proper money management.  With all this in place it can be relatively simple to profit from trading USD/JPY.

Binary Options Trading Strategies

Expiration in the Money

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Expiration in the Money

Options have their own specific terminology and this extends to the newly traded binary options as well.  Traders may be familiar with the fairly common option terms call and put, but what about others such as strike price, expiration rate, and option rollover.  I understand the confusion that can sometimes set in for new binary option traders, and have created some articles that help to explain common binary options terms.  This particular article will address the term “expiration in the money”, and will hopefully clear up any questions a trader might have about this particular term.

First of all, it is important to know that this term was not created specifically for binary options.  It also applies to vanilla options, and means pretty much the same thing whether it is applied to the newer binary options or the more traditional vanilla options.  So, what exactly is expiration in the money as applied to binary options.

A binary option consists of a strike price, which is the price that the underlying asset must exceed for the option to be profitable.  Each option also has an expiry, or a specific time at which the option is no longer consider to be live.  If the asset price exceeds the strike price when the option reaches expiry it is considered to be profitable, otherwise known as in the money.  Thus we have the term expiration in the money, which describes an option trade that is profitable.

Obviously this is the goal of all traders.  To have options that expire in the money and to make a profit from trading.  Otherwise, the trader will soon run out of trading capital and he will become an ex-trader.  There are a variety of things that can be done to see that an option does expire in the money, and this forms the basis of asset price analysis.  The true job of a binary options trader is not to make profits, but rather it is to learn how to correctly predict the future price of assets using the tools at his disposal.  If a trader can reach a point where his predictions are right more than they are wrong, profits will naturally follow.

Both fundamental analysis, or the study of broad economic data and fundamental changes in markets, or technical analysis, the study of price patterns, can be used to accomplish this goal.  In many instances it is best to combine both forms of analysis, using fundamental analysis to determine the long term trends in the markets, and technical analysis to pinpoint exact entry points that have the highest probability of a successful trade.

Either method can yield positive results, and the decision about which to use is ultimately up to each individual trader.  Money can be made with both types of analysis, with fundamental analysis being more suited to longer term trades, and technical analysis best for short term trades of an hour or less.  The bottom line is that the trader needs to learn everything possible, and do whatever is necessary to get his binary option trades to end with an expiration in the money.