part0007

In this chapter, I’m going to explain the main differences between trading binary options and investing in gold. I’ll also explain a lot of the terminologies used in binary options trading and the basic principles it’s based on .

As you probably know … gold has intrinsic value. It will never be worth £0. So go buy gold now if you can afford it and it’s being sold at a good price.

Gold is gold, it’s a real thing. It’s useful, heavy, shiny and I can buy it today and wait 2 or 3 or however many years I want to and sell it for a profit.

If I tried to sell you some gold right now, you’d buy it for some amount. You’ll never be able to get it free.

If you had enough money to buy one ounce and I was offering it to you at a slight discount, I reckon I’d sell it to you easy. If I tried to sell you shares of a failing company for the same price you’d tell me to take a long walk off a short pier .

Gold will always be worth something to someone and that’s not going to change.

If I’m desperate to get rid of my gold and the spot price has dropped from what I bought it for, I will lose some money. But I’ll never lose all the money I spent on it in the first place. So I have a sort of financial safety net there. I’m not going to be losing sleep over the price of gold.

Well binary options trading works completely differently. You don’t actually buy anything when you trade binary options. If I placed a binary options trade on gold right now I’d have the option to either CALL or PUT.

What does this mean?

Well CALL or PUT are your two options (hence binary options), you’re going to either predict a rise in the price of gold over a predefined period of time (CALL), or a drop in the price (PUT).

In my trading window on my broker’s app, I’ll press the big green CALL button if I think the price will go up and the red PUT button if I think it’ll go down. Simple as that … but there’s a million ways to make that decision and that’s where it’s not so simple.

If I pressed CALL and the price goes up and finishes higher than when I pressed the button, then I’m right. I’ll get a percentage of my investment back in profit.

You’ll realise that percentage will differ depending on the asset you’re trading, the broker you’re using and the expiry time of the trade you’re placing. It can change throughout the day for each asset .

If I place a trade and the price ends up the same at the expiry time as it was when I placed the trade, I’ll just get my investment back. No profit, no loss.

But if I’m wrong in my prediction, I will lose the full amount I invested in that trade. If I set up a £1,000 position, pressed CALL and the price finished lower than it was when I pressed it, I’ve just lost a grand.

So straight away, I can lose all my money in under a minute if I put it all on one trade and the price goes down. That is scary and it’s not the only difference either … keep reading though because it does get more cheerful I promise!

Every trade you open has a predefined expiry time that you choose when you place the trade. I’m going to start saying open a position instead of place a trade because it’s proper trading speak and I don’t want to impart my bad habits/slang on you .

This is usually selected on each minute (e.g. 10:00, 10:01. 10:02 etc.) in the case of 60-second/turbo options. They can also be in 15-minute blocks (e.g. 10:00, 10:15, 10:30 etc.) in the case of traditional binary options.

So if it’s 10:00 right now, I could open a 60-second/turbo position ending at 10:01, or 10:02 etc. If I select a traditional binary options position, it could be 10:15, 10:30 etc.

The cut-off is normally 30 seconds before the expiry time on a 60-second position or 5 minutes on a standard binary options position.

Let's look at an example of a trade. So it's 10:00 on the dot and I'm opening a position on the currency pair EUR/USD (it’s like Forex but it’s not). At this imaginary moment in time let’s say you can buy 1.1234 USD for 1 EUR .

Whenever you trade on currency pairs, the first currency (in this case EUR) is the base currency and the price quote on our chart will be the value of the second currency (in this case USD) relative to one unit of the base currency.

So if I select EUR/USD in my trade window and the price quote is 1.1234, then it’s essentially saying that 1 EUR is worth 1.1234 USD. The way the broker gets this number is actually by adding the bid and ask prices from their quote provider together and dividing the result by two.

This is normally measured up to six decimal places.

So let say I think the value of the EUR against the USD will go up within 60 seconds. It’s 10:00 so I set the expiry to 10:01 and I press the CALL button on my trading platform .

Let’s say I've put £100 on that trade and the pay-out is 80%. If the price at 10:01 ends up at 1.1235 then I get £180 back.

That’s my £100 plus 80% so a net profit of £80.

If the price didn't move, I'd just get my £100 back and if it had dropped, I'd get nothing back at all.

So I realised that sometimes I could make money really fast, unlike steadier, commodity investing. But I could also lose money just as fast, up to 100%. Well that sounds risky and it sounds like something I do not want to do!

So I set out on a mission to learn how to make this profitable for me. I had an opportunity to grow my money exponentially. Other people were succeeding at it. I just had to figure how .

I did work hard learning all sorts of strategies and methods, with mixed results. Once I understood a few different strategies and figured out which ones worked best, those results got better.

That was when I started working smart by combining some strategies together and managing my money in a way that I was 'beating the odds' (I actually hate that phrase but that’s essentially what it is) and could still profit even if the trading strategy wasn't always working.

After a lot of learning curves, I had tweaked the strategy enough that I increased my success rate from roughly 60% to around 70%. That might not seem like much, but it makes a huge difference, especially when you’re trading larger amounts and doing it all day, every day .

Next I slowly built up my trading account balance until I could afford to increase the value of each trade proportionately, in turn increasing my profit on each successful trade.

In this book I'll be going into some detail about how I did this and by the end, you'll know exactly what I do on a day-to-day basis. Everything trading related at least!

I'm not going to give you a load of vague information about how the market is a force of nature or tell you to you how there are a million different factors that affect the market then explain each one.

You're reading this book because you want to be successful in trading. You want to know what I actually do when I sit in front of the screens that makes me a tidy profit .

You probably don't care about some spiritual journeys I may been on in my life that have brought me to this point or any other B.S. and you won’t want to know all the technical crap I've learned about the Forex market along the way that doesn’t actually apply to trading binary options.

So I’m going cut to the chase here and tell you all the important bits about choosing a broker, setting your chart up and using indicators.

Then I’ll put my Life-Coach-Slash-Motivational-Speaker cap on and do some preaching. Read it all. Don’t skip it, I guarantee you will need all of it.

And bear in mind I'm going to share my trading strategy with you to help you become a more successful trader. I'm not going to talk about world events or economics or anything like that. This is going to focus on a real strategy that you can use every day and I will prepare you for ‘bad days in the market’.

My one goal from this book is to help you make more profit after reading it. If this book doesn't help you do that, then I've failed. I want this book to be your binary options bible!

So I am going to tell you what I'm doing right now to make money trading binary options. Are you ready?