I love it when fellow traders and aspiring traders ask me questions. It’s always nice to receive feedback on my blog material and to hear what others are most curious about or need clarification on with regard to trading. I’ve received a decent amount of private messages here on the website lately, so thank you all for those.
As such, below I have written out and answered the most common questions I receive in no particular order. I figured I would address them in a blog post all on their own, as I believe it could shed light into some other trading-related topics that I don’t normally cover since the bulk of my posts predominantly consider trading strategy, market and technical analysis, and so forth.
What broker do you use?
I currently use TradeRush.com the most frequently. I live in the U.S. and they are USA friendly, which always has to be my first consideration. The withdrawals are quick and the pay-out percentage on the USD/CHF (85%) is about the best of any asset on any offshore broker.
StockPair.net is also a good broker, but I have not used them for about five months now so I can’t comment any further. The withdrawals are quick in my experience, but the main thing I didn’t enjoy was the relatively weak payout percentages on the smaller time expiries. Also, their expiries work a bit differently from other brokers in that your trade will expire relative to when you got into it, instead of a fixed clock interval. What I mean by that is if you take a ten-minute trade at 10:37:19, your trade will expiry at 10:47:19, whereas on other brokers your trade would probably expiry at a regular interval on the clock, such as 10:45:00 or 11:00:00.
I’ve also used MarketsWorld.com, but I haven’t traded with them in a really long time. The pay-outs used to be the best in the offshore business (95% for all assets), but those were tapered down after they had attracted enough business. Later on, they went to a variable-payout system where the payout would adjust according to the volatility and price of the asset; it could be as high as 90%+ or as low as 65%. I don’t enjoy that so I simply decided not to resume trading with them. I also had issues getting into trades at the price I wanted, which led to some trades losing that should have won. But they are well known as having some of the fastest withdrawals out there, although I can’t vouch if that still holds true. But when I did trade there, I would often get my withdrawal the very next day.
I have also heard good things about RedwoodOptions.com, but I haven’t traded with them personally.
If you’re into trading on a U.S.-based exchange, the North American Derivatives Exchange (NADEX) may be something to look into. It is very different from a strike-entry broker, but it can offer you a different form of binary options trading. Some people love NADEX and would never consider returning back to offshore brokers.
In the past, my favorite broker was 24option.com. I always had a good experience with them. I’m not sure if they’ll ever open a U.S. brand although I heard a long time ago it was a consideration. But for now they’re off-limits to U.S. customers.
For those outside the U.S. looking for a regulated exchange to trade binary options in a similar format to NADEX, IG Markets is what you would be looking for.
Do you trade using multiple monitors?
No I don’t. I never have nor do I have any intention of doing so in the future. I’ve always traded using my laptop computer and that’s it. It can be useful to have two monitors – one for your charts and one for your broker. But for me, it takes maybe a second at most to switch from my chart to my Internet browser to click a button in order to get into the trade. I always have the trade set up on my broker far ahead of time, so I’m not spending precious seconds looking for the asset I want to trade, typing in the investment amount, or clicking my intended trade direction. It’s imperative that you always do this ahead of time. You don’t want to waste time and get in at a price you don’t want. I’m a stickler when it comes to getting in exactly at the price I want. As can be expected, most binary trades close out just a few pips from where you entered, so it’s absolutely vital to get in at the price you’d like. It’s never fun losing a trade when you had the right idea in mind but got into the trade late at a subpar price.
I could also understand the desire to use multiple monitors if you were following multiple pairs. Even back when I did that, I was perfectly fine with just the single screen of my laptop. I like to keep my expenses down, but if you feel the need to have multiple monitors like many traders do, then go for it. But for me personally, I like to stick to one only.
How many currency pairs/assets should I follow?
I like to follow only one. It can be boring, but following just one minimizes my stress and is just my preference. I’m not looking to take a high volume of trades – just a smaller quantity of very good set-ups. I have followed up to four at a time in the past by splitting my charting software screen into a 2×2 grid, with an asset’s chart dedicated to each of the four squares on the grid. Now I don’t really care for all that action and like to focus on one asset only.
How do I choose what asset to follow?
It’s entirely up to you. I like to choose whatever asset has the greatest payout percentage on the broker I’m trading at in order to obtain the highest possible profit margin. However, there is something to be said about being familiar with the asset you’re trading – learning how it acts price-wise, how volatile it is, at what hours is it most active, and things of that nature. In my opinion, it’s better to become an expert at one asset, in particular, than trying a “flavor of the day” approach and trading whatever meets the eye.
Where do you get your charts from?
I use AmeriTrade’s proprietary software called ThinkOrSwim (occasionally you might see it abbreviated TOS). It’s completely free if you sign up for an account with them (again no payment or funds are required to set up an account). It also lasts forever on your computer and receives regular updates. I really like the graphics and it has plenty of easy-to-use indicators and tools.
MetaTrader4 (MT4) is also very good and has been around for ages. As a result of its popularity, there are a ton of custom-made indicators for this software. If you’re into tinkering with indicators or just want to have a certain indicator on your chart for whatever reason, MT4 is probably the way to go. You can usually get this software for free by signing up for a demo account with a forex broker. Sometimes it may expire after a period of time (usually 30 days or 90 days) unless you actually fund a live account. Some brokers might give free lifetime access to their MT4 platform without signing up for a real-money account, but I currently don’t know of any. I have one remaining MT4 platform remaining on my computer from ATC Brokers, but that’s because I trade spot forex with them so mine will last indefinitely. However, I believe their demo account only permits limited-time access to MT4.
There are also free charting services available on the Internet, like freestockcharts.com. It may cause your Internet browser to lag, however.
What timeframe do you use?
For short-term binaries (i.e., 10- or 15-minute expiries) I like the 5-minute chart, as I feel it gives the perfect blend of seeing a close-up resolution of the price data while still being able to look back several hours at the price data. The 1-minute chart gives an even closer view, but there’s a ton of noise as only so much action occurs in the market during the course of one minute and it’s pretty much impossible to get a good view of what the market is doing on a larger scale. This is why I stick to the 5-minute chart for over 99% of my binary trading. But like so many other things, this again boils down to personal preference. I’ve actually heard of one trader who preferred to trade 15-minute expiries with a 15-minute chart. It’s all up to the individual.
For spot forex, I swing trade, which entails holding positions for long periods of time, so I use the daily chart. The daily chart encompasses a day’s worth of the entire world’s opinion. I have this set up such that the open and close of each bar occurs at 5PM EST, or roughly the end of the workday in New York.
What indicators do you use?
I only use Fibonacci retracements and daily pivot points in my binary options trading. My trading strategy is fundamentally based upon support and resistance levels, so these two indicators best help me to find these potential reversal points in the market. For Fibonacci retracement levels, I like to have them drawn on at least the daily time compression or higher (i.e., weekly, monthly). As a general rule of thumb, you’ll find that the more price data a Fibonacci retracement encompasses (e.g., multi-year high drawn down to a multi-year low), the stronger they’ll be for reversal points.
For forex, I use Fibonacci retracements only as a technical indicator. Daily pivots don’t do any good really because each candlestick I’m looking at encompasses an entire day’s worth of data.
Do you use volume in your trading?
No. For some reason, the charting software I use for my binary trade charts (AmeriTrade’s ThinkOrSwim platform) does not offer volume in its currency trading. Even so, I’ve never done any type of volume spread analysis. That doesn’t mean I’m not open to learning how to integrate volume into making more informed trading decisions in the future. But for now I am content to run with my current strategy, which has been working out very well for me.
How do you determine trend?
For binaries, I generally just consider the ongoing trend for the morning only. Most of my trades occur after 3AM EST, as the market really hasn’t had much of a chance before then to give any indication as to where it may want to head. The daily chart can give more of a macroscopic picture of the market. But looking at price history over the past six months isn’t going to give much insight as to what the market will do in the next ten minutes.
What is your money management like?
I use a fixed-investment money management strategy. I like to invest no more than 1% of the money I can afford to lose. And I keep this amount of money fixed. If you go by the percentage and you’re adjusting the amount every time you make a trade, then it can become difficult to get back up to where you were if you lose several trades in a row. Whatever you do, please don’t use a Martingale system, as tempting as it might be