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  1. #1
    Junior Member Alpha's Avatar

    One edge, two edges !!!

    As we all know, you need a certain win rate to be able to break-even when trading binary options, depending on the broker payout. I got tired of computing this win rate again and again, so I've plotted it for all typical payouts.

    If your broker has a 85% payout, with a quick look you can see that you need a system with a win rate above 54% to make money.

    I call this the break-even frontier:



    Then I went a step further, and I plotted the expected value (EV) for all typical combinations of broker payout and system win rate. The break-even frontier from above is visible here as the intersection of the colored surface (the EV surface) with the zero plane (the gray transparent plane). At this intersection EV=0.


  2. #2
    Legendry Member Michael Hodges's Avatar
    Thanks for the impressive graphics, it drives home what we have all known all along, you have to be about 54-55% right, higher if your broker pays less.

  3. #3
    Rookie Member duf180's Avatar
    Thanks, great tool!

  4. #4
    Moderator Kolyo's Avatar
    Thanks for this comprehensive chart analysis. Looks really professionally Maybe you can become the quant trader of our community, especially if you have skills with matlab Actually with good brokers you can find the 80-85% payouts and this mean exactly what your charts are showing 54-56% win rate for breakeven. This is something absolutely achievable, as I know traders that have 70-75% long term win rates, and me personally have best achievement of 67% over few hundred trades. Of course if somebody came and say look my system have 95% wining rate I won’t believe him no way. This is impossible even the best traders can’t do it!
    "The goal of a successful trader is to make the best trades. Money is secondary." - Alexander Elder

  5. #5
    Legendry Member milos's Avatar
    Very interesting approach. I'd like to call it break even point.

  6. #6
    Junior Member Alpha's Avatar
    Quote Originally Posted by Kolyo View Post
    especially if you have skills with matlab
    Close enough, I used Mathematica for the above pictures

    Quote Originally Posted by Kolyo View Post
    Actually with good brokers you can find the 80-85% payouts and this mean exactly what your charts are showing 54-56% win rate for breakeven. This is something absolutely achievable, as I know traders that have 70-75% long term win rates, and me personally have best achievement of 67% over few hundred trades. Of course if somebody came and say look my system have 95% wining rate I won’t believe him no way. This is impossible even the best traders can’t do it!
    Hmm, I could think of a few systems which would have 95% win rate. But they would trade very rarely, maybe once every two months, so they would not be very useful.

    In my view the biggest problem with binary options is finding a broker which will not kick you out if you are too profitable. Especially given that most BO brokers don't price them correctly (they have fixed payouts).

  7. #7
    Moderator Kolyo's Avatar
    You are absolutely right alpha about the pricing of BO from the brokers. Independent of the expectations of the market to move in one or other direction the brokers have fixed payouts that allows to take advantage of highly probable situations where vanilla options are priced much less favorable. I can believe that some systems which combine news order flow and technical stuff can reach very high probability but never see it working in practice, maybe it is needed too big patience to be able to execute only such trades
    "The goal of a successful trader is to make the best trades. Money is secondary." - Alexander Elder

  8. #8
    Junior Member Alpha's Avatar
    Yes, this is why I find it very funny when people say "BO are a scam, the broker has a 15% edge on you (100%-85%), you will never beat it", when in fact most BO brokers have the odds MASSIVELY stacked against them. But you do need to understand a few things to figure out why and how to exploit this.

  9. #9
    Veteran Member Dan21's Avatar
    Very impressive! Are you an engineer? Thanks for the thread, it was very helpful and graphical.

  10. #10
    Junior Member Alpha's Avatar
    On March 18, EUR/USD spiked 300 pips in a few minutes on the Yellen speech.

    During that time I was collecting Binary.com ticks. Below they are plotted against Dukascopy ticks. You can see first massive bad ticks spikes, and then that their feed was delayed by tens of seconds. I've also checked this against FXCM ticks, and the picture is the same, so this is not a Dukascopy problem. I'm using Binary.com own timestamps, so it's not a problem on my side either.

    Those bad tick spikes are 25 pips high, but a couple of ticks are 40 pips away from the market price (18:00:30 in the second picture)!!!



    And a close-up:


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