Hi my name is Marc Ashwin, and I am full timetrader. I've seen lots of people saying binary optionstrading similar to gambling. I wantto dig this topic deeper and discuss what makes it different from gambling.An informed guess which also most website states is quot;it has negative expectancyquot;. Whatis expectancy inorder to understand expectancy you need to understand probability and riskreward ratio. Probability is estimation how likely the tradewould be profitable. A toss of coin have 50% probability of landing head and 50% probabilityof landing tail. So a toss of coin have 5050 probability of winning and losing.
Second is riskreward ratio. RiskReward ratiois a ratio to compare expected return to the amount of risk. So if you trade with $10 losslimit and $20 profit expectation then your risktoreward ratio is 1:2. People who claim binary options is gamblinggive reference of coin toss analogy. Meaning the chances of landing head or tail duringcoin toss is similar to trading which also have 50% chances of winning a trade and 50%chances of lossing a trade. What that being said if the trader could increase risk toreward ratio, he will end profitable on average. In other words meaning if there is 5050 chancesof trade outcome similar to toss of coin and
your limit loss is less than your profit youwill end profitable. The table shows 100 trades 50 being losingtrades with total loss of $2500 and 50 profitable trades with total profit of $5000. The netis still a profit of $2500. Further if your probability even falls below50% that is let's say only 40% of you trades are profitable still at the end on averageyou will make money. Here we have created a software quot;trade simulatorprogramquot; inorder to put this to test, so. what we did here is we'd created a programthat will place 100 trades, and simulate coin toss, we can test it on any symbol, or anyasset, or any period, and use any dates we
want to. It's similar to the coin toss analogyonly it have stoploss which is our lower limit to 20 pips and takeprofit to 40 pips. Theresult is different than the theory. We see we are losing money shown by the downwardequity curve, we can test the program on any asset, timeframe and choose any range of period. So what is the reason we have different resultin theory. High reward to risk ratio decreases probability. Generally setting higher profittarget increases the chance of getting stopped out. Market doesn't move uniformly but ratherin a wave form. Price need some space to hit the target, setting your stoploss too closewill exit premature trade.
All trades have higher risk vs reward by defaultwhen you count spread that is bid ask difference or commission you need to first cover thatinorder to breakeven. Certainly trading binary options is not gambling.I will open my webbrowser. Inorder to login into my AnyOption Broker account. I will typeany option dot com hit enter. Type my login id and password. Close the message dialog.Trades are made based on research or analysis. Traders use different methods to analyze marketincluding technical fundament, news and geopolitical analysis.Inaddition trader can test their strategy on a demo or paper trading or backtestingto know how a particular strategy will perform.
Trading allows to change risk based on probabilityof trade if you believe that certain trades will likely perform better you can risk moreon those trades. Smart money management tools allows you toidentify and set your exposure to any particular asset. Scale in, scale out, roll over andmany other advance money management techniques. Finally hedging will enable traders to tradedifferent markets or correlated assets inorder to hedge risk. We will move back to our slide. So, that's it for now for more informationyou can visit my website that is BinaryOptionsGain .