|
I'm not sure if this is the right forum for this but we have a lot of smart individuals on TL. My dad is a smart guy, but a bit naive at times especially if it has anything to do with technology. Recently he got into trading binary options online, the basic premise is basically at 3:25 or so, you can put down i.e. $100 that XYZ stock will either increase or decrease by 3:30. If you are wrong, you get $15 back, if you are right, you win ~$70.
I've done a bit of research into this and have come to the understanding that this is a game that can't be "beaten" in the long run (although this is mostly conjecture from random posters on forums as opposed to say, an article about it on WSJ). If it is, it requires a ton of studying and knowledge, and probably not worth it as an endeavor overall. As a professional poker player myself it's also obvious to me that any site offering this structure probably has an inherent edge over the player (in the same way the casino has an edge over players in blackjack). I think my dad is up money so far, but I have a hard time convincing him that it may be just shortterm variance and that his bets are likely losing propositions in the longrun.
If anyone has a simple, pragmatic way of convincing him to stop playing I'd greatly appreciate it. He used to be a lawyer and has followed stocks for years, and he tells me that there are logical patterns in the stock charts which to me just sounds very past-results oriented. I've told him on many occasions to just trust me and to stop, but now I understand this must be what he felt when I first told him I was playing poker online lol, so I think without some effective way of convincing him, my words don't have much weight.
|
2nd Grade Probability:
The very idea of "binary" options suggests that the chances of one or the other at any given time is around 50/50 (expected).
First, you have to bet $100.
If you win you get let's say $75
If you lose you lose $85.
Therefore, in order to break even (not including commissions mind you which can be anywhere from 5-35$) you would have to be at least p1(75) = (1-p1)(85) which means he'd have to be at least 53% sure that the stock is going to go in the way that he indicates. But the fact that the time frame is low makes this virtually just like gambling, except that larger instiutions have a huge advantage. Suppose large bank ABC places a bid on XYZ, then proceeds to purchase XYZ at a higher price, thus driving the cost up. They can sell the XYZ at any time and proceed to collect the profit from the binary options. I doubt your dad has enough capital to pull something like that.
Tell your dad that he'd probably be better off in the long run by challenging people to heads or tails.
|
Assume x = decimal chance of winning in this bet.
70x - (1-x)*85 = 0
85=155x
.54839~=x
Your dad needs to be right 55% of the time to break even. This is obviously the sites advantage (assuming they don't charge a transaction fee).
Your dad thinks that it is possible to predict the stock market, but in an interval of time of five minutes, stocks are very volatile (no?), and I doubt even many professional stock traders could do it well through skill alone.
I think you should look for sites disproving this type of trading as a scam, see what other people have had to say about it.
Then perhaps agree with your dad to stop playing poker if he stops gambling as well.
|
My fear is that he'll think he's better than a ~55% favorite on his bets. The math breakdowns and such are good though, thanks guys.
Hidden: The irony is that I've turned the hobby into my career and he's now 100% happy and supportive with what I do :x
edit: ok I've pretty much combined the reasoning in both of your posts and wrote down the math all on a piece of paper and will show him in a bit, thanks again 
|
On July 16 2010 07:07 Caller wrote:
2nd Grade Probability:
The very idea of "binary" options suggests that the chances of one or the other at any given time is around 50/50 (expected).
Binary doesn't suggest anything about probability, only the number of outcomes.
|
On July 16 2010 07:23 Issorlol wrote:Show nested quote +On July 16 2010 07:07 Caller wrote:
2nd Grade Probability:
The very idea of "binary" options suggests that the chances of one or the other at any given time is around 50/50 (expected).
Binary doesn't suggest anything about probability, only the number of outcomes.
Why not? If you have only two outcomes and the outcomes are more or less independent from each other, then his conclusion is correct, or not?
|
No. Independence doesn't imply that each outcome is a specific probability, only that one outcome happening doesn't affect the chance of the other outcome happening.
|
So that they're mutually exclusive :D
|
On July 16 2010 06:57 PanoRaMa wrote:
He used to be a lawyer and has followed stocks for years, and he tells me that there are logical patterns in the stock charts which to me just sounds very past-results oriented.
This is True...ish from my limited knowledge on the subject. It's called I believe technical analysis. A former Investment banker gave a lecture on it and it seemed as if it has...reasonablish reliability? This is about as much as I know. It sounded like a mix of science and art to me.
|
Well I just talked to him for about an hour and failed lol. He is aware of the probability disadvantage but feels he has an edge. He started describing all sorts of stock-related stuff that I didn't really understand (I think one of the things was that you didn't have to bet on the result within the next 5 minutes but over time or something, idk) and we talked back and forth a lot and made a million analogies etc. He'd say, if example an oil tanker blew up, clearly the stock would plummet. I don't know much about stocks but I tried to express that if it were that easy millions would be on the binary options sites and the sites would be bankrupt. Ultimately it was my ignorance of the field that couldn't convince him that his edge wasn't as big as he thought.
I even described that the model translates to the site effectively raking you 5% uncapped which in the gambling world is a pretty high fee.
Apparently he's up 2500 betting $100 and $50 - the best I could do was warn him about letting variance/luck affect his perceived skill.
|
Some investigation from google produced this:
http://www.informedtrades.com/400196-binary-options.html
The seller obtains an advantage 2 ways. The first is binary options cannot be exercised early. The second is that they have a fixed payout.
Let’s say an option writer writes a regular naked call option (sells a call option on a stock that he does not own, and also he does not own another option to protect him from large losses). That option has unlimited risk, because technically the stock price has no upper limit.
In option pricing, volatility is everything. There is historic volatility (how much the stock has gone up and down in price in the past), and implied volatility (a calculated guess on how much the stock may go up and down in the future).
By making the payout on these a fixed amount and limiting exercising to the expiration day, they are taking out much of the uncertainty. This gives the binary option seller a statistical advantage. A simplified way of saying it is that statistically a binary option seller has a better than 50-50 chance of coming out ahead over time selling them, and statistically a binary option buyer has a less than 50-50 chance coming out ahead over time buying them.
The major point here is that binary options are falsely "safe". In purchasing the options, your father is essentially saying to the seller "I don't want to risk more than X, so if you will take all losses over X, I will give you all winnings over Y". Statistically, this averages out in favor of the seller, not the buyer (namely, not your father).
If that doesn't work, last resort:
You say he's a smart man, so he should readily grant that binary options are a zero-sum game, even before the "rake". The only way he can make money is by someone else losing money - because, in the act of trading a binary option, no value is created anywhere. It is speculation, and speculation is by default zero-sum.
Zero-sum games/systems are never stable unless the win/loss ratio is extremely close to even. Nobody will continue to play a zero-sum game when they're losing 60% of the time, because that is identical to just giving away 10% of your money.
So, if he honestly believes that he is making money, he must logically believe that someone else, somewhere, is losing a correlated amount of money (more, because of the way the dealers set the prices). This person will not continue to do this indefinitely.
However, binary options are not new. They have been in place for a long, long time. This is not a possible outcome of a system in which payouts are skewed heavily in one direction.
Therefore, as a matter of pure logic, he's only up because he got lucky*, and, given time, he will lose just as much and eventually average out to breakeven.
*Possibly. The part that I'm not sure about relates to the fact that stocks, as a whole, are not zero-sum. If you invest in a fund that covers the entire stock market, you will generally make money. Speculation on stocks is zero-sum around this point, not around zero - individual speculators basically never consistently make more than the stock market as a whole made. Thus, depending on how exactly binary options interact with the market, your father might see returns located roughly around the returns generated by the stock market he's betting on - but, still, he's basically throwing away money compared to investing in an index fund.
I wish you luck, but most people are of the opinion they're special and can do something that tens of millions of other people have tried unsuccessfully. In most cases, the only thing that will teach them otherwise is losing money.
|
Risk does not equal return obviously. I think he also needs to know that you can not consistently predict stock prices in the long term. Much less the short term. Finance theory calls the price changes as a "random walk". If your father knows how a stock behaves, then why doesnt he just throw down on e*trade?
|
Sounds like a self-justified gambling addiction. No amount of reason can get through to him, just keep a close watch on his net gain/loss and jump on any chance that he starts losing money.
|
On July 16 2010 10:46 itzme_petey wrote:
If your father knows how a stock behaves, then why doesnt he just throw down on e*trade?
He has long-term and mid-term investments, he considers this to be a short-term investment.
I'm not sure if it's his form of degenerate gambling, he's pretty risk averse in general.
But thanks for the input everyone, especially kzn.
|
On July 16 2010 11:29 PanoRaMa wrote:Show nested quote +On July 16 2010 10:46 itzme_petey wrote:
If your father knows how a stock behaves, then why doesnt he just throw down on e*trade? He has long-term and mid-term investments, he considers this to be a short-term investment. I'm not sure if it's his form of degenerate gambling, he's pretty risk averse in general. But thanks for the input everyone, especially kzn.
TBH I think you just hit it on the nose there. I think your father may just be addicted to gambling. No matter how you spin binary trades, its just gambling. Maybe you should look into getting him to open up about how he feels about gambling and just go from there? It seems he is justifying this type of gambling by putting an "investment" spin on it.
|
On July 16 2010 11:29 PanoRaMa wrote:Show nested quote +On July 16 2010 10:46 itzme_petey wrote:
If your father knows how a stock behaves, then why doesnt he just throw down on e*trade? He has long-term and mid-term investments, he considers this to be a short-term investment. I'm not sure if it's his form of degenerate gambling, he's pretty risk averse in general. But thanks for the input everyone, especially kzn.
Latching on to one thing you mentioned:
You could try explaining that the idea of a "short term investment" is pretty ridiculous. Investment means putting your money into something with the expectation that, with some work and value added etc, you generate a return.
Long-term investments make money because you put, say, $1000 into a new tractor. The tractor makes you more efficient at farming, so you have more produce to sell every year after you have the tractor. The return on the investment is the amount of money made by selling that extra produce.
But a crucial point here is that it takes time. You dont just put $1000 into buying a tractor and then sell your tractor for 5% more money - that money has to come from somewhere, it has to come from work.
Short-term investments make tiny amounts of money. Any time you make a "short-term investment" and make more than like 0.5%, you just got lucky.
[edit] and hell, even 0.5% is a bit much - I'd be surprised if you could consistently make 0.5% returns off of 1-month long investments. The amount of money that counts as a real return from a 5 minute investment is probably less than a thousandth of a percent.
|
Tell him to stop with this rigged crap and take a look at those stocks that are calculated based on the value of indexes... I forget the appropriate term... But with foresight, you can actually win big on those. Its basically like trading a commodity, except the commodity is the value of the index.
|
thedeadhaji
39133 Posts
two thumbs up to kzn.
predicting the market in 5 minutes is utterly absurd... MAYBE a month and you can do this by looking at world economic trends...
|
16834 Posts
On July 16 2010 07:07 Caller wrote:
2nd Grade Probability:
The very idea of "binary" options suggests that the chances of one or the other at any given time is around 50/50 (expected).
Just to reiterate what a previous poster pointed out, this is flawed.
Whether or not the sun will rise tomorrow is a binary option. The chance of it rising tomorrow is virtually 100%, and the chance of it not rising tomorrow is virtually 0.
|
On July 16 2010 22:47 Empyrean wrote:Show nested quote +On July 16 2010 07:07 Caller wrote:
2nd Grade Probability:
The very idea of "binary" options suggests that the chances of one or the other at any given time is around 50/50 (expected).
Just to reiterate what a previous poster pointed out, this is flawed. Whether or not the sun will rise tomorrow is a binary option. The chance of it rising tomorrow is virtually 100%, and the chance of it not rising tomorrow is virtually 0.
Lol but the chance of some stock going up in the next 5 min is 50%. What point are you trying to make here?
|
On July 16 2010 07:08 Hidden_MotiveS wrote:
Assume x = decimal chance of winning in this bet.
70x - (1-x)*85 = 0
85=155x
.54839~=x
Your dad needs to be right 55% of the time to break even. This is obviously the sites advantage (assuming they don't charge a transaction fee).
Your dad thinks that it is possible to predict the stock market, but in an interval of time of five minutes, stocks are very volatile (no?), and I doubt even many professional stock traders could do it well through skill alone.
I think you should look for sites disproving this type of trading as a scam, see what other people have had to say about it.
Then perhaps agree with your dad to stop playing poker if he stops gambling as well.
Anyone who took statistics knows this is absolutely correct. If your dad believes he can forecast markets 5 minutes in advance he should start a hedge fund.
|
16834 Posts
On July 17 2010 02:28 Glacierz wrote:Show nested quote +On July 16 2010 22:47 Empyrean wrote:On July 16 2010 07:07 Caller wrote:
2nd Grade Probability:
The very idea of "binary" options suggests that the chances of one or the other at any given time is around 50/50 (expected).
Just to reiterate what a previous poster pointed out, this is flawed. Whether or not the sun will rise tomorrow is a binary option. The chance of it rising tomorrow is virtually 100%, and the chance of it not rising tomorrow is virtually 0. Lol but the chance of some stock going up in the next 5 min is 50%. What point are you trying to make here?
No, the chance of a stock going up in the next five minutes isn't 50%, it depends a lot on the market. For example, after Consumer Reports recommended users to stay away from the iPhone 4, do you think the chance of Apple's stock going up in the next five minutes is 50?
|
Poker is not gambling simply based on statistics, how do some people make it to the final table on WSOP multiple times in their career? As long as there is like 5% skill and 95% luck you can still make money.
|
On July 17 2010 02:32 Empyrean wrote:Show nested quote +On July 17 2010 02:28 Glacierz wrote:On July 16 2010 22:47 Empyrean wrote:On July 16 2010 07:07 Caller wrote:
2nd Grade Probability:
The very idea of "binary" options suggests that the chances of one or the other at any given time is around 50/50 (expected).
Just to reiterate what a previous poster pointed out, this is flawed. Whether or not the sun will rise tomorrow is a binary option. The chance of it rising tomorrow is virtually 100%, and the chance of it not rising tomorrow is virtually 0. Lol but the chance of some stock going up in the next 5 min is 50%. What point are you trying to make here? No, the chance of a stock going up in the next five minutes isn't 50%, it depends a lot on the market. For example, after Consumer Reports recommended users to stay away from the iPhone 4, do you think the chance of Apple's stock going up in the next five minutes is 50?
You are wrong, you will not be able to trade that information unless you have insider information. Price auto adjust as soon as that report is released, and you have nothing to gain unless you SPECULATE what the report is going to say before it gets released.
Simple example: if report released 5.00001 minutes before, stock go up 5.0000000001 minutes before option expire, you enter option at the adjusted price at 5 min mark, you have no new info to trade on.
if report release after you enter the option, then you don't know what the report will say when you enter the option. Hence there is nothing but gambling in this game.
|
16834 Posts
On July 17 2010 02:33 Glacierz wrote:
Poker is not gambling simply based on statistics, how do some people make it to the final table on WSOP multiple times in their career? As long as there is like 5% skill and 95% luck you can still make money.
Right. Everyone who plays poker at a decent enough skill level knows all the underlying statistics. When it gets to top levels like that, players are all competing against each other. I'd say at the highest levels it's much more skill than luck. Sure you may be dealt an unlucky hand, but as long as you have the skill to convince others otherwise, you'll come out ahead.
EDIT: In response to your most recent post, I suppose you're correct.
|
My suggestion is over the long run, your dad will run a net loss. He currently does not have enough data history for this statistics to become reality, but in time it will prove your point. Just give him some time.
|
The "patterns in the stock price" discussion is silly: to the extent they do develop and are predictable, they are arbitraged away in milliseconds - some 75% of trading in the US now is the so called "algorithmic trading". This means at any given time the price is really close to reflecting the "fair" value of sorts, including any "pattern" information.
|
On July 17 2010 02:32 Empyrean wrote:Show nested quote +On July 17 2010 02:28 Glacierz wrote:On July 16 2010 22:47 Empyrean wrote:On July 16 2010 07:07 Caller wrote:
2nd Grade Probability:
The very idea of "binary" options suggests that the chances of one or the other at any given time is around 50/50 (expected).
Just to reiterate what a previous poster pointed out, this is flawed. Whether or not the sun will rise tomorrow is a binary option. The chance of it rising tomorrow is virtually 100%, and the chance of it not rising tomorrow is virtually 0. Lol but the chance of some stock going up in the next 5 min is 50%. What point are you trying to make here? No, the chance of a stock going up in the next five minutes isn't 50%, it depends a lot on the market. For example, after Consumer Reports recommended users to stay away from the iPhone 4, do you think the chance of Apple's stock going up in the next five minutes is 50?
Then how do you know if a consumer report is coming out on the iphone with positive or negative info within the next 5 mins? Like everyone says.. stock prices are a random walk in the short term.
|
thedeadhaji
39133 Posts
yup, "short term" is definitley the key here.
|
|
|
I risk getting some mod action for this post, but I haven't seen anyone give a good enough answer. Let me try to explain:
Like retail scalping, binary options are bets against the house. This is different from actual trading, because in actual trading, you're taking money from other participants. However, binary option brokers, or "bucket shops", are the source of liquidity for those that partake in their services. If you make enough money, you will not be able to trade with them anymore because you are literally taking their money. (Jesse Livermore)
Retail scalping is taking the retail brokers money because the liquidity in the retail market is mostly provided by the retail broker itself. So, if you hold a position only for a few seconds for a news event, like the RBA rate cut hours ago, and then sold after profit, that profit would literally be coming out of the retail broker's pocket.
Some of the big brokers which allow retail trading have been in trouble for manipulating their platforms and such. They are in the business to make money, and will do things to prevent you from taking their money. (Not that they trade to make money, but the services they provide make them money.) They won't directly take the money out of the account, but if you have a stop order on your account, they can have a program which may have the price shown on your platform specifically hit the stop, even if the major inter-banks prices never did. They can make an EA stop being profitable because they will know how it works.
Btw, how is your dad doing?
|
Hi PanoRaMa,
I've been a mid stakes cash poker player for several years now. I would say we have similar understanding of EV and variance.
Recently I have investigated daytrading, and what your dad does is one form of it. There are many different betting structures such as the binary options your dad is doing, but ultimately it all boils down to whether you can predict short term movement in the market.
This is my take on daytrading: I came into looking at daytrading with extreme skepticism. Unlike poker, where +EV plays are clear, I couldn't see where a daytrader gets his edge. After a few months of reading forums/ebooks/talking to people, I STILL haven't found how a daytrader gets his edge. I've read some technical / fundamental / sentimental analysis tricks but I've yet to find anything that is a certain mathematical edge like we can find in poker.
However on the other hand, there are ALOT of daytraders. And even a lot of people claiming to be long term successful daytraders. So that suggests there may be some winning strategies out there, but until I find one I'm not convinced. It's also possible that there is no edge, and all these winning daytraders are just on the good side of variance.
I would say there's about 10% chance your dad actually has found some kind of strategy which gives him enough of an edge that he can overcome the 5% rake. The fact that your dad already knows some strategy for mid and long term investing in stocks makes this more possible. There's an 80% chance its impossible to have any edge in daytrading and your dad is just gambling. Theres a 10% chance you can have an edge in daytrading, but your dad hasn't found a successful strategy and his pseudo-strategy is nonsense and he's really just gambling.
I recommend you ask him to teach you how to daytrade. Then you'll have a better understanding of which of the above scenarios I mentioned we are dealing with here. If there really no edge in daytrading, you should be much better equiped to point out logical fallacies in his strategy from your poker training. This will be the best way to convince him at least that his strategy doesn't make sense. You may also discover that your dad indeed does have a real strategy that can be winning long term. This is an even better outcome - you've just found your next career after poker becomes unprofitable in 5-10 years time.
Rangi
|
Interestingly, until a while ago, some of the major binary option market makers actually had mispricings in their model, which made certain FX one-touch options very attractive and +EV. (i know this because some hedgie friends of mine used to make some massive bets on these regularly)
However, i digress.
Retail trading is mostly a scam. The bid/offer spread you have to pay up pretty much eats all possible edge you can think of, and the shorter term you get, the worse you get eaten by the spread
Broker/spreadbetting companies wow people with fancy charts and colours to make people think that they can trade/have an edge, when there is no edge to be had in the first place.
Retail daytrading is basically trying to play poker with a 20% rake. Not saying you can't win but... uh yeah you can't win lol. Pay a huge desk fee, deposit 100k, a fibre optic co-located connection with appropriate software and rebate schemes can get your costs down to the more reasonable 5% rake (or whatever arbitrary equivelant) - and then you enter the world of locals (historically used to describe prop traders in the pit, but obviously these days the same guys but on the screen). Then you have a chance. In a game where still, 95% of fully equipped locals still end up quitting/losing everything
And that's in a fair environment. You have no idea how shady these guys can get once you start trading any kind of reasonable size with regards to slippage, cancelled orders and other credit risk shenanigans
|
Norway893 Posts
The only way I've found to make money at the stock marked is using technical analysis, however how stupid people want you to believe it is.
"double bottom" and "double top" are two good things to keep an eye out for.
And buy stocks in companies that make money, don't chase after "cheap" stocks in loser companies, which most people actually do.
Anyway, I've been a daytrader actually, and I specialized in one specific stock.
I made tons of money by just staring into the computer screen day after day..it was boring as hell, but you pick up on certain patterns.
I had to quit because in the end I traded with so much money that I just couldn't handle it in my head.
Believe it or not, losing money wasn't what made me quit, I was not being in the stock when it rocketed.
A shareholder was selling an insane amount, and the stock had plummeted for days...I predicted the price go up when he quit, which it did.
I had 200.000 NOK ready to invest, and wait 3 days and sell.
Everything went according to plan...absolutely everything, but I just didn't have the balls to buy, because it just kept falling and falling.
The seller quit, the price went up from 5.8 to over 10 NOK (on day 3, as I'd predicted).
If I had followed my plan, I would have made a lot of money.
But I just failed.
Thats when I found out I didn't have what it took 
|
On December 06 2012 08:49 Epicfailguy wrote:The only way I've found to make money at the stock marked is using technical analysis, however how stupid people want you to believe it is. "double bottom" and "double top" are two good things to keep an eye out for. And buy stocks in companies that make money, don't chase after "cheap" stocks in loser companies, which most people actually do. Anyway, I've been a daytrader actually, and I specialized in one specific stock. I made tons of money by just staring into the computer screen day after day..it was boring as hell, but you pick up on certain patterns. I had to quit because in the end I traded with so much money that I just couldn't handle it in my head. Believe it or not, losing money wasn't what made me quit, I was not being in the stock when it rocketed. A shareholder was selling an insane amount, and the stock had plummeted for days...I predicted the price go up when he quit, which it did. I had 200.000 NOK ready to invest, and wait 3 days and sell. Everything went according to plan...absolutely everything, but I just didn't have the balls to buy, because it just kept falling and falling. The seller quit, the price went up from 5.8 to over 10 NOK (on day 3, as I'd predicted). If I had followed my plan, I would have made a lot of money. But I just failed. Thats when I found out I didn't have what it took
200.000 NOK seems like a REALLY large amount for 1 trade. I was under the impression for trading, you shouldn't risk more than a small % of your bankroll on a single trade. Something like 1-5% (I'm guessing).
You say you have been a successful daytrader, how long did you do it for? And can u estimate for me how many trades in total you have done? 10s? 100s? 1000s?
Rangi
|
So you dad thinks his lone judgement can outdo investment institutions that run DTF optimization/quant models with better assumptions all day long and STILL can go under due to uncertainties in the market.
Ok.
|
On December 06 2012 08:49 Epicfailguy wrote:The only way I've found to make money at the stock marked is using technical analysis, however how stupid people want you to believe it is. "double bottom" and "double top" are two good things to keep an eye out for. And buy stocks in companies that make money, don't chase after "cheap" stocks in loser companies, which most people actually do. Anyway, I've been a daytrader actually, and I specialized in one specific stock. I made tons of money by just staring into the computer screen day after day..it was boring as hell, but you pick up on certain patterns. I had to quit because in the end I traded with so much money that I just couldn't handle it in my head. Believe it or not, losing money wasn't what made me quit, I was not being in the stock when it rocketed. A shareholder was selling an insane amount, and the stock had plummeted for days...I predicted the price go up when he quit, which it did. I had 200.000 NOK ready to invest, and wait 3 days and sell. Everything went according to plan...absolutely everything, but I just didn't have the balls to buy, because it just kept falling and falling. The seller quit, the price went up from 5.8 to over 10 NOK (on day 3, as I'd predicted). If I had followed my plan, I would have made a lot of money. But I just failed. Thats when I found out I didn't have what it took
I find it kind of funny how you say that technical analysis is the only way to make money, when in fact you used a very simple piece of market psychology (huge seller liquidates his position/stops selling) to have a view on the stock price
Personally i think coming up with "winning" ideas is actually very simple. There are some products which are absurdly simple to trade (like interest rate boxes), it's just the majority of people fuck up on the bit that actually matters (executing the price you want, keeping your costs down, bankroll management etc.)
![[image loading]](http://img84.imageshack.us/img84/7910/gasfoil.jpg)
Case in point, this is the kind of stuff i trade. It's really not hard, you sell at the top of the range and buy the bottom lol. No technicals, no fundamentals (not directly)
Unfortunately, you'll never have access to this product as a retail trader (unless you pay up HUGE costs, in which case you'll make zero). And even for those who do trade it, everyone fucks up by executing the wrong price, doing it too large in size, stopping out at the top and bottom, not watching out for the physical traders who actually move these things in the first place), being impatient (look at the timeframe, i'm literally holding these for weeks to make a tick)
Like, sometimes we get new guys in the office and they are lost, and i'll just show them a random chart of something that people are trading. In a lot of ways it's really simple, you can immediately see your edge and you should be able to experience what goes wrong if you try to execute it
Trading is (and honestly, should be), as boring and as simple as knowing your edge immediately (mean reversion in a fly in this case) and just selling the top and buying the bottom of that product lol
edit:
FYI, if you were to try and do this fly through a normal broker or any other kind of IR fly, the minimum spread on the outright alone will be like 3 ticks wide
That would basically mean even if the pictured product is trading at the ABSOLUTE bottom of the range, your spread as a normal person would mean you would be paying the top of that range to buy it IF you have a good broker.
|
The most reliable way to make profit in the stockmarket is go the index long and stay long.
If you can do fundamental research you could pick stocks individually, though i dont think annyone here is capable of doing high quality fundamental research.
Trading short term on technical indicators is gambling , just like poker is though there are not manny people willing to admit this, and manny dont even recognise this.
Your dad should stop trading binary options because of the costs structure.
Like someone else said in this thread, its like playing poker with a 20% rake.
The most efficient way to trade is with futures.
|
If i read correctly his dad has made 2500 so far. I know you would like to convince your dad to stop but as long as he isn't stupid and continues to bet when he is in the hole, then i don't really see a problem with it.
|
This seems like its the same thing as a long straddle, where you buy a call and put option together so you profit when the stock moves significantly in either direction. The only way to "beat" the options market on these kinds of trades is for you to understand their models and where it is flawed, so you can exploit the flaws. That is, your dad better have a good understand of schotastic differential equations, probability modeling, and the modified Black-Scholes formula. The guys on the other side of the trade are probably all quant geeks with financial engineering degrees from MIT. Honestly this trade seems like a good way to get screwed very quickly.
|
Binary trading begins with a simple click and end with the hope of making huge profit overnight. This is a basic instinct of modern trading techniques. However, the reality is far away from what they show to you.
I didn’t mean that no one can make money in binary options trading, even many people earn good fortune, but they remain aware of all pros and cons, before putting a trade. It’s important to learn the market thoroughly and read binary broker scam reviews to ensure that you aren’t on the wrong path. No matter how much the bonus or payout offered by any platform, if it’s not genuine, you can’t make money for long term.
|
|
|
|
|
|
EPT
