The essence of trading binary options is to make profits from prediction of the behaviour of the chosen asset. If you have access to an expert advisor or a trade indicator, the process is made much easier. Indicators and expert advisors typically work by telling the trader to buy or sell at a particular price using a chosen profit target and setting a stop loss at a particular price target as well. In the binary options market, the process is simplified, and all the trader needs really is to use the direction of the trade signal to take a position on a binary options contract. The stop loss target is not important, but the distance of the profit target as defined by the indicator or EA will give the trader an idea as to how long his expiry deadline should be set to.
The following is a trade analysis of how profits were made on a currency asset using the trade direction provided by a forex indicator. The forex indicator is the FX Turbo Indicator, which uses price action to indicate buy or sell signals on the MT4 forex platform. This indicator, which is commercially sold, is a composite suite made up of several indicators that have been primed to work on several currency pairs as well as selected commodities and stock indices. It works best on the 1 hour chart.
On June 26, 2012, the indicator was applied to the hourly MT4 chart of the GBPUSD currency pair. The indicator eventually gave a sell signal, and the stop loss and profit targets were identified. The trade was replicated on the Betonmarkets binary options trading platform, where a position was taken by purchasing a contract predicting that the GBPUSD would be strictly lower than market price at the end of one hour. The trade results are shown on this screenshot:
The trade eventually went our way with a profit of $88.72 on a stake of $111.28, giving us a $200 payout.
Highlights of This Trade
1) There was no need to conduct a great deal of market analysis. The indicator had already been primed to use price action analysis to give us a trade signal, which it did.
2) The only area where some analysis was required was in setting the expiry time. The indicator we used works best on hourly charts. When used on an hourly chart, it usually aims to take profits of a maximum of 50 pips. This is not so far away from the entry point, so a careful note was made of the market conditions to see if the price would stay above entry point by the end of one hour.
3) When we were sure that one hour was enough time to deliver profits, a one hour expiry was chosen and the trade was executed in the direction of the signal.
4) We chose the Rise/Fall trade contract type because this is the only contract type that allows a one hour expiry on Betonmarkets. If our analysis was done on a daily chart for instance, this would have allowed us to choose more trade