Make Profit during False Breakouts with Binary Options

20 Apr 2013, 08:00

The forex market has always been popular, but nowadays players on this market have also started to trade forex on the binary options market. This helps them increase their profits because they are more likely to succeed in case of short-term speculations deriving from various events. Trading forex option is often consider an indispensable additional tool for forex traders. The binary options market is a new one and there are still problems like lack of solvency which need to be solved. Returns are not necessarily high on this market, but the losses and the profits are fixed and this makes it very attractive for certain traders. Statistics also say that only 10% of all trades end out of the money while 70% are making profit. These figures look pretty good and determine numerous Day Traders, Swing-Traders and Scalpers to enter the binary options market.
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Generally speaking, traders make use of patterns or events on the market when they place a trade. A strong event or pattern will definitely attract a large volume of trades leading to increased chances of making profit. Unfortunately, sometimes an event which seems strong enough does not attract enough volume and ends in a false breakout. The expectations of traders are not met and a pullback takes place before they have the opportunity to make money. Such events are highly frustrating, but losses can be minimized by also trading on the binary options market.

For instance, it was assumed that the FOMC Meeting Minutes on the 17th of February 2010 would generate a strong event which will lead to a rally of EUR/USD. A pullback which occurred at 20.00 PM has left lots of traders on the forex market without their profits. Someone who would have also traded forex options would have probably gained at least $70. He only would have had to place a Put option on EUR/USD at the time of the event. If the value of the option was $100, he would have won $170 and made $70 profit if the price of EUR/USD was below the initial price. Despite of the pullback, as long as the price was lower than the initial one, the trade would have been profitable. On the contrary, trading the same asset only on the forex market would have generated no profits at all.

The binary options market offers traders the possibility to also exploit weaker events which might not generate income on the forex market. Instead of only waiting for very strong events or patterns, they can target more events, even if they are weaker. The binary options market basically allows traders to make profit even in market conditions which are not considered favorable on the forex market.