Which Market Is Best for Binary Options Trading?

Previously in the article “Strategies for Binary Options Trading” we discussed the new simplistic strategies used in Binary Options trading.  In this article we are going to discuss how you can determine if you should trade in the Forex, Stock, Commodity, or Index markets.

Do Your Due Diligence

Due Diligence is the buzzword for doing your own research.  It is important for you to research your target market before starting to trade.  In conventional trading you would look at the historical charts, financial reviews, SEC filings, economic indicators, and news reports.  In Binary Options trading since the typical trading period is one hour in length, studying the charts, reading the news reports, and watching the effects of economic indicators will be sufficient in most cases.  However, many experienced traders can’t help themselves in continuing to do more in-depth research.

Which Market Is Best?

Deciding on which market to trade in is a really tough question.  Each market has their pros and cons.  Part of your research into which market to trade is understanding the make-up of each market.  Remember the Spread strategy that I discussed in “Strategies for Binary Options Trading”?  In that example I used two currency Assets as the initial selection to make a CALL trade and an offsetting PUT trade.  In reality, you do not have to make the CALL trade and the PUT trade in the same Market.  As an example, the CALL trade could be in the currency market and the PUT trade could be in the Stock market.

In order to select which market to trade in let us take a brief look at each of the four markets:

Currency Options Market

The Currency market, also known by the popular name of the Forex market is composed of currency pairs such as the relational value of the EUR (The Euro) vs. the USD (U.S. Dollar).  There are many currency pairs available for trading.  Each broker has their own list that they make available to the public.  One of the advantages of the currency market is that it doesn’t have any baggage that it carries with it in the way of stock certificates nor is it constrained by many SEC regulations requiring report filings.  It is strictly a relationship between two defined currencies.  The currency markets are heavily influenced by economic indicators and world affairs.  Also, the price movements can be extremely erratic and change rapidly.  Currency markets are open 6 days a week, 24 hours a day.  Currency Binary Options are best traded between major economic news events.

Index Options Market

The Index markets, like the currency markets do not have the burden of certificates and SEC regulations as compared to the Stocks market.  However, the Indexes are composed of valuations of many Stocks therefore, a major change in any one stock affects the value of the Index.  Indexes tend to have longer trend lines, but can reverse themselves sharply after an economic announcement or world economic event.  Examples of well known Indexes include: the Dow Jones, Hang Seng, NASDAQ, S&P 500, Bombay 30, IBEX 35, IPC, and the SSE 180.  Index Binary Options are best traded after major company announcements for companies that make up that particular index.

Stock Options Market

The Stock markets are based on stock certificates issued by companies.  Well know examples are IBM, GOOGLE, Yahoo, and Microsoft.  While they are affected somewhat by economic indicators due to panic selling or buying by investors they are more influenced by a company’s financial and productivity news.  Stock Binary Options are best traded immediately after major news and earnings reports involving that particular company.

Commodities Options Markets

Commodities markets are based on commodities which are agricultural or industrial in their raw and unprocessed state such as gold, copper, silver, oil, natural gas, etc.  Commodities are typically traded on the future price of the product.  Intraday prices of commodities tend to be Moving Sideways in their Trend lines except when there are major news events about the commodity and around inventory, demand, and import report times.  Futures Options are based on 3 month contracts thus making the best time to trade Commodities Binary Options at the start and midpoint of the futures contract period. Commodities are very sensitive to economic reports in which they are related.  As an example, a hard freeze report in the citrus growing regions before harvest will affect the futures prices of citrus crops.

As you can see, each market has its ideal time to trade Binary Options.  By doing your own research into the various markets you’ll find your ideal point in which to trade.

Watch for the next article in the Binary Options Trading series, “The Importance of Economic Indicators in Binary Options Trading.”  We will discuss the effects economic indicators have on the trading markets.

Advice from a Newbie: How to get Indexed, Market your New Site, Gain Traffic, and Start Affiliating

For all of us bumbling newbies out there, I decided to write a discussion of how I got indexed and some good ideas for getting web traffic.

If you are planning a site, or have just written a web site or blog, I have learned that the hardest thing seems to be getting traffic. I am trying to learn more about how to bring traffic to the site, but, the main thing is that with all the content in the world, it could languish in no person’s land forever, if you do not promote your site. So, that is what I have been trying to do. How?

First of all, I am going into blog sites like “blinkbits” and “bloglines” and creating accounts. So, if you like the content on any of the pages, you can, as of today, add it to those two sites by pressing the buttons on my site. These links take a while to create, but, I am taking that slowly. What happens is that when a reader adds your page to one of these sites, it creates a link which increases your site’s rankings.

I have also been actually “marketing” the site the way you would market anything else — I tell people I meet, friends, family, acquaintances, salespeople, anyone we think would get some value out of the site. While it seems old-fashioned, it has generated some people coming in to take a look. I have made it a signature on all of my e-mail so that when I send e-mail, people can learn about the site. I also submitted the site itself to my web design software which has caused a number of people to come in to look at the site.

A major marketing device is the blog carnival. When I first published the site, I had no idea what a blog carnival was; now, I understand it a bit more: it is really a place to showcase your articles along with others who are showcasing their articles. On the days of submissions, I do get more traffic; some of it leads to revenue, some of it leads to just people looking at what I am saying. Traffic, however, is very important: if nobody is at your site, nobody can read it. I try to follow up by reading other people’s posts, commenting and becoming part of the community that already writes about my topic (personal finance).

The best place to find carnivals is at http://www.blogcarnival.com/bc/clist.html. Not only will you find lists of carnivals on a variety of topics, but there is a submission form which you can fill out to submit your post to the particular carnival in which you have an interest. That site has been an excellent source of information and one that I visit on a very frequent basis.

So far, I have submitted several articles to the Carnival of Personal Finance, the Carnival of Investing and the Carnival of Debt Reduction. But, Carnivals exist on tons of topics, not just personal finance: so your website/blog articles need not be on a financial topic to find the carnivals useful. I even posted an article on the Carnival of Bumbling, Struggling Newbies, which I hope will grow as time goes on, because it is a good place for all of us newbies to join forces and support one another.

You may be reading this at e-zine. That is a source of articles on a lot of different topics, and this is the third article I have submitted there. (For a list of my articles, click on the author name).

Getting on to Google and other search engine indexes is not so easy, but, it does happen if you are patient. Within a week of establishing the site, I finally came up in a search. That is like the Holy Grail — in the Monty Python sense of the term: hooray me, I got on Google Search. Actually, if you type the exact words “taking control over money” into Google Search, you do get my web site popping up first (at least for now), although I cannot figure out exactly why based on all the site optimization advice I have been reading, but not following. I just stumbled into the number one spot by pure, dumb luck.

However, I did not get indexed by luck. I asked Google to index my site, and I have gone onto every search engine I could think of and done the same. I know I am indexed on Yahoo and I am hoping to get into a category index in the open-site directory (which includes AOL). Each search engine has their own rules; be patient and go to each one and let them show you how you can get indexed. You do this by literally looking through the site itself: for example, for Google, go to http://www.google.com and poke around for a section on getting indexed. They will take you through the process.

Being indexed does not mean that people are reading your site: it does mean that the words are being read by the little spiders and other tools that search the web automatically. Real people may or may not find my site through searches depending on what search terms they use.

There are a lot of people out there who can teach you site optimization techniques. I have found that such techniques are not so useful for me based on the type of software I am using to create my site and my level of skill as a site designer. Jon at http://www.successpart2.com offered a free e-book on site optimization on his website recently. I downloaded it, and will go through it after I am satisfied that the words on the site, the content, is as good as it can be.

That brings me to my main point. Content is key. It does not matter what you do, if you have nothing to say, or you do not say it well, you will not get or maintain traffic. This is advice I read early on (see, http://www.stevepavlina.com, “How to Make Money on the Web,”) and it is advice I continue to read all the time.

I feel like it is the content that should count the most. I have not only seen that a number of times written by people with far more experience, but I have found that wasting my time playing with things that take a lot of work to learn have not paid off as much as my plain old common sense approach to the site: keep it going, nurture it, add to it, and fix it up all the time. The traffic will come. I read a lot of free materials about gaining traffic and when I get a good idea, I try to do at least some of it. That is what led me to e-zine. I read about submitting articles there as a way to get your site out, and I began to do that because it made sense to me.

Be aware though: Only you know why you are writing your site. If it is because you have information that you wish to share or a product you wish to sell, then keep that focus in mind. My reasons — to share what I am learning, to learn more about my own personal finances, to be accountable to someone for maintaining my new system of personal finance — have led me to reject joining certain offered programs. I will not disparage programs, but, I was given an opportunity to try a “training program” for 14 days. The free materials were very good and readable, but once I got closer to having to sign up, the posts started looking very much like a sales pitch for a “pyramid” scheme.

From what I could gather, the “training company” was going to charge me a lot of money to use my site to promote their site. I have no interest in those type of junk sites: I am not trying to “get rich quick,” and I while I am trying to monetize my site, I am not doing so at the expense of my integrity. I just do not believe in the idea of creating a self promoting site that offers no real content value (the original program had content; the sites “affiliated” with it did not. If I had joined, I would have owned a site without content which would lead people to their site: I had no interest in that.

How did I decide that the program was a scam? I actually went to the sites under the “customer testimonials.” Every site was similar in tone to the training program’s marketing materials and looked like fronts for the training program’s site. There was little content on the affiliate sites, they were mainly “link” sites bringing people to the training site. What I got from that experience is what I have known: if someone says they have the secret that will make you money, and guarantees you will get rich without a lot of work on your part, I would run from that. They are appealing to greed; if that is you, cool, go for it. I would not do it. And there are a lot of those types of scammers out there in the internet.

Another piece of advice is that your e-mail address is gold and getting others e-mail addresses could be gold for you if you eventually want to have a subscription service. Be aware of who you give your e-mail to: it could come back to haunt you in the form of spam — use common sense or what I like to think of as the “real life” rule. If I would not give information about myself to that person in real life, I will not give them information on the internet.

This is true for other aspects of your site as well. If you want to get your site known, and you go to other sites for information or advice, ask and be polite. In the money/finance world of online publishing, I have found that there is both a community and a hierarchy and I do not wish to usurp those at the top or be rude. It reminds me of when I started my current job: in the beginning, I listened more and chose not to impose my views. As the years have gone on, I am more openly opinionated. Now, with a website, obviously, you wrote it because you have something to say; but, that does not mean you need to knock the others down in order to say it. I know that seems common sensical, but I have seen more experienced people talk about how other people have demanded information or help from them and how offensive such demands really are to them.

Thus, having good content, gaining traffic and building your site are your primary concerns. You also want to make money. If you are planning to make money from the ads you put on your site, you will need to affiliate with advertisers. The easiest to use and, in my limited experience, most reliable affiliation, is Google Adsense. There you will get content linked ads that will be automatically placed when you cut and paste their code into your website. There are a lot of other affiliate sites out there and you could spend far too much time affiliating rather than creating good, readable content and marketing your site. Good affiliations are only useful if your content attracts traffic. I spent a whole day trying to affiliate with different companies and it was exhausting, tedious work. I am back to my basic affiliation strategy after that experience.

My strategy is simple: affiliate with natural fits and Google AdSense which is the simplest affiliation of all. I try to connect to affiliates based on products that I use or are useful or tie in to my site. When I started affiliating, I went straight away to the web site of a store that sells the file solutions filing system that I talk about in “Taking Control Over Finances.” I also went to the store from which I buy my office and school supplies, as well as Quicken and Amazon. Those are products I use and products that I am comfortable advertising.

If you are looking to affiliate, most company web sites have a link to their affiliate programs on the home page or in the “contact” page. Sometimes, you need to search around a bit. Many companies belong to networks such as Linkshare and Commission Junction. So I ended up getting accepted by their programs and that led me to affiliate with other companies whose products I think might be useful to my readers. If you look through my site, you will note, that, for the most part, other than the AdSense ads, I put ads to other affiliates on the pages related to their products.

For example, my Quicken ad is on the page where I discuss how I use Quicken, a link to Amazon is on the page where I have reviewed Jim Cramer’s Real Money, and a new site that I found, that offers coupons to major stores is on this page as well as on the article, “Getting More Value Out of What You Buy.” I chose to place my ads that way because I want them to really be a natural fit with my content; I don’t just want the site to become a big advertising space. Also, I do not want to spend a ton of time on affiliations: I want to spend time on content and traffic. The affiliations are not hard once you get the hang of it.

The main thing for newbies, like myself, is creating a good, solid web site with excellent content. You can submit parts of it, the articles, to other places to help you build traffic. You can place ads very simply using AdSense and affiliate based on “natural fits.” And keep working on what works for you. I have learned a lot so far and you will too.

Come back to the site for more marketing tips, or to leave a comment and your own advice. I am always searching for information on this topic and on the topics of money and finance. And remember, your web site may be a lot of work, but, it is rewarding — I am very proud of my site and how much I have learned in a short period of time. I was with some friends the other day who did not understand that I had created a real web site and who knew nothing about this potential revenue stream. They looked at my site and were stunned that I had created it: it felt good to get such high compliments from my friends and it feels good for me to look at my site and feel that sort of pride.

I hope that some of my suggestions are helpful to you. They are all based on my own actual experience. In creating a web site, experience really is the best teacher.

What Markets Should You Use for Your Portfolio?

A couple of years ago I made a fundamental mistake: until then I had my portfolio focused mostly on index futures markets. For years I have had with this approach really nice results. But that year, I experienced how frustrating it can be, to go through a couple of periods when index markets are underperforming. That was when I have decided to work really hard and improve my intraday portfolio composed of automated trading systems (ATS).

Smooth equity isn’t just about the systems – it is a smart combination of markets, timeframes, trading approaches, and, later on, also innovative position sizing. When you think about it, there is the logic behind it.

Even though in times of financial shocks and surprises there is barely any negative correlation in the markets, there are still some markets which live their own lives – and they offer us smart way for diversification.

The result is that when one of the market groups is not doing well, there is another, which compensates the losses from the first one – and makes the equity overall smoother.

What market groups you should use

This is the first question – what markets groups you should combine in order to get the desired result – smooth equity.

We have following futures groups: Index, Currencies, Metals, Energies, Bonds, and Grains. Every market group lives its own life and you can find at least one noticeable market in every group that can represent the whole group.

Personally, I have experimented with all groups and, besides currencies, I can highly recommend any combination. The currencies are, from ATS point of view, highly unstable (for example in Forex, ATS are failing really fast and it is really difficult to find profitable ATS for Forex). It also depends on how many markets you create a system for, and how many markets you trade with your account. But even with rather a small account, you can trade 3-4 markets. For such cases, I would recommend following combinations:

Combination of 3 markets (pick one market from each market group):

  • Index
  • Grains
  • Energies

Combination of 4 markets (pick one market from each market group):

  • Index
  • Grains
  • Energies
  • Bonds

Nowadays, I trade several portfolios that are based on the 4 groups mentioned above. Here is an example of one of them (breakout strategies, 30-minute chart, 5 markets, equity for the last 8 years, trading 1 contract per system):

The net profit for all 8 years and all markets combined is 421,548 USD and the max drawdown is just 12,315 USD.

Smoothen the equity by using multiple timeframes

The second way how to smoothen your equity curve (in a combination of trading several markets from different groups) is using several timeframes for every market (ideally without changing system parameters, or with just small changes).

It is more like a final touch than smoothing the equity, but it brings up an interesting idea that it might be better to add new timeframes instead of trading multiple contracts in the same timeframe. Another option is to optimize also the timeframes (check the results of your system on several timeframes and pick one timeframe for each market – it can, but doesn’t have to be the same) – but then, we need to ask ourselves how much of over-optimization this is.

Anyway, here is another example of the portfolio mentioned above, when for every market we add the second, 15-minute, timeframe. The equity is slightly smoother, the drawdown hasn’t increased so much, but the profit has.

The net profit is 812,457 USD and the drawdown is 18,815 USD.

What systems to use

The best variant is to have in a portfolio both trend and also counter-trend systems. Still, it is sufficient to have a system that can smartly react on both situations (equally, if possible).

I am specialized in breakout strategies and I can say that it is all you need to have a balanced portfolio across several markets – but only if you have systems trading both long and short. Sometimes you just need a simple breakout strategy that doesn’t have great performance (that you wouldn’t trade individually), but in combination, you have a nice portfolio with smooth equity curve. You need to constantly focus on the performance of the portfolio – it is more important than the performance of underlying systems. Remember when there is a huge drawdown for one market (system), the others can compensate that and you can still make a profit.

For that, you need to have a quality workflow setup how to create new and new strategies, as you will need a lot of them and for several markets. At the same time, it is crucial to have a setup of robustness testing procedures so that we can add to our portfolio really robust strategies.