Using VPA for trading binary options

Question

Hi Anna I can’t wait for the binary options book you’re writing to come out. I read your VPA book and your Three Dimensional Book and both are great. You see what I trade is Binary Options and so far only Binary Options. Soon I will also trade forex but binary options has been my only avenue in the trading world so far. What I was wondering is does VPA apply to Binary Options just as it does for forex? In your previous books you really don’t mention Binary Options so I’m unsure if the tools are relevant for binaries or does VPA need a little tweaking for it to work on binaries. I guess it’s only one way to find out, which is to start using the Principles of VPA on Binaries to see how it works. If you have any other advice on using those strategies for Binaries please let me know. I know a lot of my questions probably will be answered in your binary options book that will be coming out but I guess I wanted to get a head start if you know what I mean. Thanks Anna

Answer

Hi – Many thanks for your email and very kind words about my books. I hope to have the binary options book available in the next few weeks. So thank you for your patience.

To answer your question as to whether VPA can work with binaries, the simple answer is yes, since binary options are derivatives of the cash market, and therefore provided you have volume reported in the underlying, exactly the same principles apply. With regard to advice on trading binaries, as I am sure you know it is a minefield at present and which I cover in great detail in the book. What I call the good, the bad and the downright ugly. There are many traps for the unwary so please take care. As a general comment I would suggest that any binaries of less than one hour is no more than a bet, which is fine so long as you understand this is the case.

The more you can get time working for you, then the greater your chance of success. Time is one of the defining aspects of a binary, as not only are you being asked to forecast the direction, you are also being asked to forecast when an event will happen. An option is a wasting asset and as a ‘holder’ of an option, time is not on your side. This is a very different proposition from standard trading. In addition, you are also trading an instrument with a fixed risk, fixed reward profile which flies in the face of the mathematics of trading returns. Whilst the limited risk aspect of the binary option is very appealing, trading all the time using such an approach is doomed to failure in the longer term. Hope the above helps & kind regards. Anna

About Anna 1030 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

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