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  1. #1
    Junior Member alexhiggins's Avatar

    U make me shaky.. !!!

    Hello to all - and sorry, this is a bit long message..

    And yes, this will be too early too, because I'm only on the (about) second class of your college and the more I read, the shakier I get - I notice I know hardly anything, and the binary option world is like a shoreless ocean.. - but here we go:

    First, I want to thank for the site and for the forum. I have enjoyed dozens of articles and comments, and learned a lot. So I decided to further utilise this forum and write a little history of my own. First, I will be dealing more with issues such as money management and, maybe, philosophic approach to this phenomenon. I have to also point out, that none of the following is really my own ideas or conclusions - I merely copy the lines of thinking by the more matured traders that I have personally found most attractive and plausible. This may sound silly, but because of my legal education, no matter how high the authority is, I never take his / her plain word for any issue (but I need to go and see what the law actually says).

    For me binary options trading looks and feels like a game, but I will try to use the "trade" word.. So, I trade with currency pairs and from some 2 min to 30 min time periods. I know its more risky than longer time frames, but that's a kind of a guy I am..
    In some stages of my life I have been interested in roulette (even though I know that the house always wins), so I started my binary options "career" - of course - with martingalish approach. I looked for a safest possible form of it (doubling limited to three, and if lost, then raising the opening bet, and so on). But in the end, it was always a disaster; I can't understand how there are still so many "binarists" promoting martingale technics - are they brokers agents?

    So, my first conclusion was: Never try to protect a losing bet with a higher bet (to same direction and inside same time period). If you make a wrong choice, do not try to save your bet with another bet. Amen to that.

    Yet, for a long time I quite often first did take my defeat graciously, but then I had the next "independent" bet (ideally to direction but in the next time period) raised - so that I would get my loss back with the very next bet and at the same time gain some profit. This is a method I still can't totally condemn - I played reversals, and in case the trend went on and passed my predicted reversal point, I deduced that at least the end of the trend is now nearer than it was during my previous bet.. So, it should be more probable that I will hit the reversal on my second attempt! As I said, I still find this line of thinking logical as such. I have just lately decided against it, because I now find that it is against to principals of my mental approach to the challence of growing to be a succesful player (sorry, a trader), and because I have solemnly promised to myself to stop fearing the losses but instead always reach for the maximum profit. So, that is the second maxim too: Do not let your fear of losses shrink your profits.

    Another recent conclusion based on the above mentioned principal is cutting the use of the hedging "safety bets"("leg-in" I think it is called). At some point I used to do this:
    It is easier to explain through an example I think: I bet "call 10 €" in a 5 minute time frame. Following a nervous, edgy start - yippii! -the candle grows up, above my bet line (ITM). Now I bet "put 5 €" inside the same 5 minute time period. I breathe easier, my blood pressure goes down, I put down my nitro pill and take a sip of red wine.. (no, delete the last ones). Anyway, my logics behind this move is: I want to protect my precious 10 € so that even in the worst scenario, I will loose only some (10 € - [5 € x 0,8]) 6 €. So, I don't have to use a higher stake on my next bet - If I get the next 10 € bet right, I have gained ([10 € x 0,8] - 6 €) 2 €. And what is much, much better, I can also hit the jack pot ([10 € x 0,8] + [5 € x 0,8]) 12 €. And - it just gets better and better - If my first bet is in the money but my safety bet goes off, I still win ([10 € x 0,8] - 5 €) 3 €! - How can I help not winning with this ultimate system! So, I must be a genius - and soon a very rich one too..

    Hmm... A few weeks went by, but I didn't get rich, and gradually I started feeling less of a genious too. Finally I spent a whole weekend comparing my actual bets with an alternative result in which all the "safety bets" had been excluded. It turned out that every single day I had done better without the safety bets. Every single day. After that observation I did take some red wine.

    The problem with the hedging safety bets was, that I never got the full (10 € x 0,8) 8 € profit, but I did get a considerable amount (some 25 - 30 %) of full 10 € losses - I couldn't safeguard those bets that never, at any point of the chosen time period, were on the right side of the betting line (in the money). Or maybe they were just a little bit during the very first seconds, but I was hoping for a wider "fork" and it never came. When I did manage to choose the right direction with my initial 10 € bet, the safety bet was out of the money with some 70 - 75 % probability, and very seldom I managed to get the jackpot. I had simply spoilt my chances for decent profits with panic-like use of the safety bet instrument.

    So, the bitter lesson to me was: do not use the safety bets to protect your initial bet. You can use the hedging bet, with caution, as an offensive instrument, but not as a safety net. Once you make your decision and commit to either call or put, do not change your mind as soon as it looks like you have chosen right. If you are in the money during the "race", there is surely more than 50 % chance you will win the bet - that is just obvious. So, once again, I had been a regular moron, and not the genious I thought I was.
    Ok, I still sometimes use the opposite direction hedging bet - when the initial bet is deep in the money and there is a sudden move of the asset price to the in-the-money direction during the closing moments of the bet, because then I do believe there is a decent chance for a minor corrective movement.

    But all in all, I have come to the conclusion that the only pro-approach to the betting and money management is using always the same (to me some 1 - 1,5 % of the capital) initial bet. Making your decision and then sticking to it to the bitter end. Well, all rules can be broken, and sometimes you can simply notice your mistake too late, and then you might want to change your mind in the middle of the bet, but that should be a very rare phenomenon. So, unfortunately, as for the bet size and money management, it is the dullest variation that seems to work best - sigh to that..

    And further more - just a little bit - at the moment when I start trading in the morning, at 7 AM UK time, I set both profit and loss limits. I want to make 5 % profit a day, and if I end up losing 15 %, I quit for the day. However, I dream of being more of a civil servant in the future. I think the most pro way of trading would be from 9 to 5 - like in any job: you start at certain time, and finnish when it is the time to finnish. And on the way, I will have a regular lunch and a couple of coffee breaks. How about that for the next 15 years? (Then I hope to retire.)

    Yours,

    Alex

  2. #2
    Moderator Kolyo's Avatar
    Hi Alex,


    Your first post is really impressive in terms of information and analysis, congratulation for it Asking more questions is the right way to move ahead, that’s why I am encouraging you to continue to ask in the future. I will try to answer your questions here very briefly – first of all – martingale is never a good strategy, actually it is not a strategy at all , it is gambling technic to help you lose your account faster. I don’t say that variable bet size is bet, but trying to double your bet size or increase it exponentially each time you lose is a receipt for disaster! Second answer – trying to hedge your open contracts with opposite direction trades is not good too. The cost as you found is too big and unnecessary to allocate capital in such bets. Best approach is to try to select the best possible entries according your strategy and then keep always bet the same amount of money. 1% rule seems much better than 5% or something bigger. You will definitely agree that it will take you lot of time to zeroing your account if you bet only 1% on a trade, and while you practice you will become better and better. Of course best way to start is on demo, but many newbie traders prefer to lose some money in order to “learn” faster! I don’t think this is practical too.

    Wish you good luck and hope to see you around in the community!
    "The goal of a successful trader is to make the best trades. Money is secondary." - Alexander Elder

  3. #3
    Junior Member alexhiggins's Avatar
    Quote Originally Posted by Kolyo View Post
    Hi Alex,


    Your first post is really impressive in terms of information and analysis, congratulation for it Asking more questions is the right way to move ahead, that’s why I am encouraging you to continue to ask in the future. I will try to answer your questions here very briefly – first of all – martingale is never a good strategy, actually it is not a strategy at all , it is gambling technic to help you lose your account faster. I don’t say that variable bet size is bet, but trying to double your bet size or increase it exponentially each time you lose is a receipt for disaster! Second answer – trying to hedge your open contracts with opposite direction trades is not good too. The cost as you found is too big and unnecessary to allocate capital in such bets. Best approach is to try to select the best possible entries according your strategy and then keep always bet the same amount of money. 1% rule seems much better than 5% or something bigger. You will definitely agree that it will take you lot of time to zeroing your account if you bet only 1% on a trade, and while you practice you will become better and better. Of course best way to start is on demo, but many newbie traders prefer to lose some money in order to “learn” faster! I don’t think this is practical too.

    Wish you good luck and hope to see you around in the community!
    Thanks a lot for the encouraging words. I'm already piling up some questions, so will definitely be back!

    Alex

  4. #4
    Legendry Member milos's Avatar
    Hello Alex!

    Welcome to Communitraders community! Use 1-2% risk management.Read bots school.Test CT demo account!

    Milos

  5. #5
    Junior Member alexhiggins's Avatar
    Thank You, Milos. I feel I'm in good hands here, so will indeed follow Your advice!

    Alex

  6. #6
    Veteran Member Dan21's Avatar
    Hi, Alex! You made a very nice introduction. Reading it was very interesting. You should really try to trade with a demo account for a while - just until you feel real comfortable with your assets and strategies. There's no need to hurry. Trading is like a very special art - you need time to master it so it overcomes the gambling stage and gets on the much more solid ground of probabilities and analyzing. I'm sure you'll do fine here. Ask anything you want. The great pro guys here will give you the best advise they can.

  7. #7
    Junior Member alexhiggins's Avatar
    Quote Originally Posted by Dan21 View Post
    Hi, Alex! You made a very nice introduction. Reading it was very interesting. You should really try to trade with a demo account for a while - just until you feel real comfortable with your assets and strategies. There's no need to hurry. Trading is like a very special art - you need time to master it so it overcomes the gambling stage and gets on the much more solid ground of probabilities and analyzing. I'm sure you'll do fine here. Ask anything you want. The great pro guys here will give you the best advise they can.
    Thanks a lot, Dan21. Very wise words. I'm not yet sure I can handle the patience required for successful trading, but I'm sure very motivated.
    As for the lack of patience, I have now gone through the college of the BOT school, and I know I should wait with my questions until I reach the "doctor's thesis", but here we go :
    I have lately been testing (randomly) the different indicator time periods. I want to know why is RSI normally 14, and what happens, in general, if the time sequence is shorter (or longer) - do U get more false / risky entry signals with a shorter period, or does the accuracy depend on the trading time frames or beyond how many time frames you want to make your bet..? - this is all very confusing to me. I mean, should I, e.g., shorten my RSI period if I use 15 minute time frame and want to bet the very next 15 minute expiry (instead of making my bet last 3 x 15 minutes)?

  8. #8
    Legendry Member Michael Hodges's Avatar
    basically, longer time frames are typically safe, shorter time frames more risky. Most use a combination of short and long term analysis no matter what kind of trading they prefer. I think it is safe to say that most signals in the short time frame you describe, 15 minute, should be used with 15 to 30 minute expiry at most unless very strong.

  9. #9
    Legendry Member willyw's Avatar
    Hi Alex, a long introduction but nice.Welcome on board

  10. #10
    Active Member StumbleTraderDB's Avatar
    Hi Alex! You are right, Binary Options is almost always simply betting on the movement of a market. I know that Nadex is an exception, actually connecting the trades to the market, but I don't know of any others that actually do that. A couple have been quite open about the trades amounting to bets, when I read their FAQ or asked their chatbot. Of course, if you have no qualms about gambling and go into it with your eyes wide open, you use terms like "trade" as part of the game. I've come to see it as just something to play around with in demos, just for the intellectual challenge of developing a consistently successful strategy and the practice of mental discipline.

    Good for you on going through the school here. Check out the diaries for some real-life examples and stories to learn from other people's actual experiences. You might also enjoy the Skype group that Okane set up... this might work: https://join.skype.com/oRaZJ0NKc5NM

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