Hopping onto active stocks is almost always a good idea when trading binary options. It really doesn’t matter which way they’re going, as long as they are moving in a clearly defined manner. On Monday, February 3rd, there were some very good choices that fit this description; even some major stocks now fall into this category. General Motors was probably the most significant mover of the day, even if they weren’t necessarily the biggest mover during the course of trading.
Over the course of the day, GM’s stock fell over 2 percent. If you were looking at binary options for this stock, you might think that just sitting on a consistent stream of put options would have been your best bet, but unfortunately, it’s not quite that simple. Yes, puts were the general trend of the day, but you would have been best approaching them in a certain way. Looking at charts for your daily trading will help you a lot here because of the intricacies that always occur.
Let’s break up the course of the day to get a feel for what a “bad day” looks like in reality. First, the trading day starts at 9:30 AM EST, but the vast majority of binary brokers do not allow you to touch stocks or indices for the first 30 minutes of the day. This is for a good reason. This is the busiest time of the trading day, and the most movement occurs here. And, you (plus every other serious trader out there) have a whole night to prepare for the trading day beforehand, so it’s usually pretty obvious what’s going to happen during this half hour. If there was bad news in between the previous close and this open, traders are going to be all over it and the price will drop quick. So rather than let you make a lot of really easy money really quickly, the brokers need to protect themselves and not let you trade. But, as you can probably guess, trading doesn’t stop after this point.
The biggest drop for GM–predictably–occurred between 9:30 and 10:00. After that drop, there was a sharp increase. If you put a short term put here, you would have lost your trade. Then, prices dropped in a big way again. Then they went up. This pattern of ups and downs is called oscillation, and it occurs on every time period you look at. Prices never move linearly, but rather always have ups and downs to correct and overcorrect themselves. Sometimes the corrections are big, and sometimes they are small. What matters in binaries is where the end price is at the time of expiration. Even if the stock loses 2.30 percent in a day, if you had ten 60 second binary put options at $100 each–something that should have earned you at least $700 if you were correct–you could have easily lost $1,000 because of poor timing.
From about 2:00 until the market close at 4:00, the price of GM actually ended up. If you were still trading put options at this point, you would have been out of luck. This illustrates timeliness. Whatever action had occurred was pretty much done for the day. If you wanted to make money on your put trading, the opportunity was over by just before 2 PM.
Why GM lost so much doesn’t matter too much. It matters that it lost, and that a very real opportunity for making money on binary put options occurred, but the point here is that it’s never quite that easy. You need to pay attention to the trends within the market and time entries and exits with perfection. A lot of binary traders forget this, and as a result they lose money.
If you were trading Forex you wouldn’t really need to worry about individual stocks. You can trade Forex by using Tom’s EA or some other kind of EA. GM can be difficult to trade with automation software. Always remember to take the best trades if not matter the market you are trading. We’ll continue to update you on the progress of GM and some other markets so make sure you come back.