My experience with Binary Options trading

I finally tried one of the many Binary Options trading apps that popped up on one of the ads on my phone the other day. This one is called 'IQ Option', and looked professional enough to give a try. After I registered I opened a Demo account to start trading with a fictitious €1000. For those who are unfamiliar with Binary Options trading, let me give you a brief explanation. Basically it's like normal trading but this time your trades are under a time constraint. With regular options this is usually a few months, now your options will expire within a few minutes or seconds after you've placed an order. It's simple to understand: will your trade go up (call option) or down (put option) after it expires within the given time frame. And believe me those times are very short, especially when you select the 'Turbo' option type.

Let's begin, the following screenshots were taken directly from my phone:


When you start trading the EUR/USD for instance you can see the bars on the chart moving rapidly up and down. Now let's place your bets, will the currency pair close higher or lower when the time runs out (red flag on the image).


For this trade I entered a put option (short). As you can see this option will expire in 37 seconds(!). It's the little circle under the big red 'Put' button on the image, and my wager is €50. If I win I get €92, if I lose I lose my bet of €50.


This time I am a 'winner'! And I just made €92. That's a €42 profit in 37 seconds! This is what I call beginners luck, because most of my trades (read: bets) didn't go so well. I actually lost my entire €1000 in a matter of a day! Sometimes you win, but in my case I lost most of the time. And I have been trading regular stocks and options etc. for years! This Binary Options trading app should be part of an online casino. It really should! I don't see any difference in placing a bet on the roulette table (red or black) or simply saying higher or lower and wait half a minute. You probably noticed that I started to refer to the trades as bets, because in my opinion that is exactly what they are.


I love how the IQ Option app classifies your winnings as 'income' to make it sound as you can actually make a living out of this.

Conclusion:

Easy to understand and easy to trade, in particularly with your cell phone, but Binary Options trading falls in the same category as gambling in my book. There is no way you can make profitable trades consistently. Anyone who claims that's possible is not telling the truth and is probably working for an options broker. Sure, you may win the first time or even a second or third. The bottom line however is that eventually you will lose your entire investment. The risk is simply too high!

This has nothing to do with actual (options) trading, where consistent profits are possible by conducting proper market research. This moves so fast that even normal jumps in the market can cost you. If you like gambling and trading then this might be something for you. My advice however: stay away from it, it will cost you!!

Expecting another drop in the markets after Brexit this week

It was quite a hectic trading week last week. Volatility continues to dominate the markets mainly due to the Brexit vote, so I'm expecting the markets to drop even further this upcoming trading week as the battle between the EU and Britain goes on. Can it go lower? Oh yes it can! This whole Brexit and political instability in Great Britain is to blame. It seems like no one can make up their minds! Once you think it's going in one direction it goes exactly the other way. I never would have thought to hear the abbreviation 'Regrexit' for instance. I won't elaborate on that now. But anyway, what does this mean for this upcoming trading week? The GBP is likely to depreciate even further against a basket of major other currencies, same goes for the EUR/USD, oil and major world markets (Asia, Europe and America). The age old question is by how much and when can we expect to see a rebound. As long as there is no clear direction in the markets I don't think any time soon. Therefore I'm trading with extreme caution this week, I have my eye on the GBP/USD, FTSE, EUR/USD, the oil trade (all short), and gold and VIX (all long). As always I'm looking for the perfect entry point for all trades. As of right now I don't hold any positions. I honestly did not expect a Brexit, in fact I even tweeted last Wednesday, right before the vote, that my prediction would be that Britain would remain in the EU. Evidently I wasn't the only one who was wrong and baffled by the results, the Dow Jones dropped more than 600 points last Friday, and other financial markets around the world plummeted. People were shocked by the outcome.

It's hard to stay optimistic when markets crash like this, but I think there are also huge trading opportunities in such a scenario. If the markets rebound then it's game-on! Not only there are great opportunities in the currency markets, but also the commodity and stock markets. Stocks that were heavily affected by the result of the Brexit may then be a lot cheaper, think of British automakers for instance. In the short term I don't think this chaos is far from over, mainly because I expect other countries in Europe wanting to hold referendums soon as well. A Frexit, Nexit next? Perhaps every country in Europe might want to hold their referendum, only causing more economic instability in the (financial) markets.

It's not only the Brexit that is causing turmoil in Europe, today Spain is holding elections as well, the outcome could spark even more volatility. Whatever the case is, chances that the markets rebound tomorrow and the rest of the week is slim to none in my opinion, especially now that there's so much going on. It definitely is not going to blow over in a week, that's why I believe there are a bunch of short opportunities, go short now while you can (in the right trades of course)! Eventually the markets will correct themselves, but until then it's trying to make money with short positions.

Limit your risk, and research trades well before you execute them.

Let's have a profitable week!

Like roulette? You'll love binary options trading!

In the world of trading and investing, the terms 'gamble, gambling or betting' is actually offensive. There's a big difference between analyzing, and being able to explain why a certain equity will trade up or down according to your analysis, than simply betting 'up or down' without doing any proper research beforehand. Chances are that you'll lose money fast! That's the reason why usually gamblers, yes even the 'professional' ones, are out of money very soon and most consistent traders are able to sustain a decent income.

If you like roulette, you probably like binary options trading - same thing. You bet either on 'red' (up) or 'black' (down, forget about the zero), spin the wheel that spins for fifteen or thirty minutes (whenever the option contract expires, sometimes even 60 seconds!) and you instantly win or lose - cool isn't it? All that without the cigar smoke from the guy standing next to you in a casino. I pretty much briefly explained the concept of binary options trading just now, you place your bet: either 'up' (call) or 'down' (put) on a certain underlying asset like a stock, commodity, forex or etf - wait patiently for thirty minutes, because that's may be how long it takes for the big and mighty binary options trading spinner to stop (every binary option broker has its own rules about expiry and no, you can't exit sooner) and you either win or lose - simple as that! It doesn't matter if your underlying security spiked up or down during that time frame, what matters is where the price is at the end, when the option expires.

Binary Option Trade example for EUR/USD

As you can image there's a huge risk/reward ratio, and just like with roulette you might win a few times - but the bottom line is that it's almost impossible to make a living (or a consistent profit for your portfolio) playing roulette, eeh.... I mean trading binary options. The odds are essentially always in favor of the house (broker). Binary options brokers are deceptive, usually have very professional designed websites and present you with the 'tools that make you money'. I've been approached several times by various of those binary options brokers via VDM trading, asking me if I could help promote their financial product by posting their articles on this site, in some cases for quite a bit of money. Since I only endorse and advocate sound investment advice, the ones that will hopefully help you make the right investment decision, and is more geared to the long term, I immediately declined. I've been trading for many years, and when it comes to trading binary options I can tell you this: don't do it! Don't even allocate a small percentage of your portfolio to this relatively new 'trading' concept, and claim it's part of your diversification, it's just not worth it.

Is binary options trading a scam?

Despite what I wrote above, generally speaking binary options trading is not a scam. Of course I don't know all the brokers out there, some may be more questionable than others - therefore it's a good idea to open a demo account first or carefully read the fine print if you do decide to trade binary options. The bottom line is that just because this form of trading carries a tremendous amount of risk, so much that it can be even compared to gambling, doesn't automatically mean it's a scam. A scam usually is something that is a rip-off, takes more money from you than you invested, or something that doesn't show the whole picture. The action of trading mini-option contracts that can even expire within 60 seconds is what it is, you know beforehand what the risks are, and what the possible rewards are. Therefore I cannot classify binary options trading as a scam.

Conclusion

Play roulette, it's a lot more fun, doesn't have any hidden fees and you might meet some interesting people.

Trouble in the middle east and Japan? Markets don't seem to care.

This is one some of the strangest trading weeks I've ever had. I usually post some of the higher probability trades once in awhile on the blog, but due to lack of market direction I really can't come up with any.

What is up with the markets?

A lot of things have been going on in the world, turmoil in the middle-east, Japan's radiation leak, a severely over valued Euro and the markets show no sign of fear (VIX), rather a smooth recovery, in fact the VIX hasn't traded so low in a long time. The Dow Jones Industrial Average seems to be trading sideways now, so it's hard to be bullish on anything, is there a global collapse in the near future? Or are we going to continue to see positive numbers? One of the main reasons is, despite all the negative news that has been going lately in the world, is that companies are hiring again and the people that filed for unemployment dropped, making the unemployment rate drop a nice 0.1%.

Will this be enough? Obviously, collapsing governments and rebellions against the existing governments in the middle east doesn't seem to affect the global markets and economy. To me, this can only mean one of two things either;

A: Once the markets settle down (how it's trading sideways right now) the anxiety will kick into a lot of investors, wondering why the markets aren't pulling back as much as they show 'under normal circumstances' which will make the market move lower and pressure will build on the VIX and the markets,

or B: Trouble in the middle-east is viewed as 'nothing new' and the global economic recovery will steadily continue.

Regardless, the VIX trading at these low levels under the current economic situation is quite baffling to me.

This week I'm keeping a close eye on and being bearish or bullish on;

• VIX (VXX) ▲ is bound to trade higher by the end of the week. Target at 19.
• FXE ▼ The overheating Euro is bad for the European economy and intervention is highly likely. Target set at 1.400.
• SPY ▼ for May @ 130 Put
• QQQ ▼ for April @58 Put
• DIA ▼ for Arpil @ 120 Put

A quick glance at the VIX so far, incredible, especially with all that has been going on;

Global stock markets panic due to Japan's crisis.

Just as you thought things couldn't get any worse, they did. A huge sell-off occurred on all major exchanges around the world. Japan's Nikkei 225 index lost another astonishing 1,015 points (▼ 10.5%) due to fears of a nuclear meltdown. This morning the Dow Jones was down over 200 points and European stock markets booked similar losses. The VXX ETN shot up almost 5% (trade recommendation yesterday).




Are the markets overreacting?

I think this huge sell off of Japanese stocks is clearly an 'aftershock' reaction. A sell off of this magnitude is in my opinion a little bit exaggerated, but it will take some time for investors to realize that. When that momemt comes we have to start looking for bargain stocks. At the moment we have to pay close attention to volume on the Japanese stock exchange. How much is being sold at a given time. And it seems to me, the downwards spiral has just begun.  Unfortunately things will get a lot worse in Japan before they will get better. A global chain reaction is imminent.

Take a look at the Nikkei 225 index so far this week;

Not a pretty picture at all. For the past 4 days, nothing but losses with the last two trading days (after the quake) being the worst. In the last week alone the Japanese stock market lost over 18%.

This trading week is crucial. As soon as we start to see some positive numbers it means we have more buyers then sellers and could mean the bottom has been reached. If not, I'm afraid we'll see more substantial losses over the course of the rest of the month.

I'm waiting for any positive sign, at the moment, getting the nuclear plant under control would spark that. As of right now I'm staying away from any stock. My main focus is on ETFs/ETNs.

The following targets for short term trading (end of this week) once news from Japan settles in;

ETN: OIL ▲ Bullish, Expiration Month: March

SPY and QQQQ: ▲ Bullish, Expiration Month: March

VXX: Bearish ▼ , Expiration Month: March

EWJ: ▲ Bullish, Expiration Month: April

Dow Jones down, VIX and oil up, Rajat Gupta insider trading fraud news not helping either.

Rajat Gupta
Photo by Mackson
Wasamunu/Reuters

It looks to me some parts of the market have finally caught on to the unrest in the middle-east. It's main factor of course being oil. The recent spike in oil have investors on wall street worried it will slow down not only the US economy but the global economy as a whole.
Another breaking news item that weighed down on the markets today being that of Rajat Gupta's insider trading case that could even be bigger then Bernard Madoff's ponzi scheme! He was charged by federal regulators. Certainly not helping investor's confidence.
The result?
As of right now the Dow is trading a whopping 168 points lower so far.
As I mentioned in previous posts a few days ago, the VIX (volatility index; a.k.a the panic index) was trading in dangerously low territory. Under these global market circumstances (meaning the unrest in the middle-east) the VIX trading under 20 is relatively a low number, sooner or later it had to spike up, ...and it did.

Here we go again, playing the VXX ETN trade

Rising violence, chaos and instability in Egypt have surely an impact on the markets. There are numerous ways to approach several trading opportunities regarding this issue, like oil for instance, but I think I'm sticking with keeping an eye on the VIX, or the Exchange Traded Note (ETN) the VXX that tracks the movement of the VIX.
Now here is my setup for this trade; as always, any comments or questions are welcome.

First, a technical overview of this trade; the VXX

I'm taking the Feb19 Call Option on the VXX with a strike price of 31 for $1.33 (the VXX1119B31) with unlimited profit potential. Makes sense? With an important turn is history for the middle east where about a third of its total population is demanding revolutions in their respective countries, I think it makes total sense, it has to have an impact of the 'fear gauge' the VIX, therefore the VXX.

The intraday chart of the VXX1119B31;

Trouble in Egypt may reveal market direction.

A couple of things I'd like to address in this post. The recent instability in Egypt surely has revealed some market direction to a number of ETFs and commodities. There are a few I would like to focus on in particular. In a nutshell these are; Oil prices (OIL), The US Dollar Index, and the Egypt ETF (EGPT).
Oil, now trading around $90 a barrel has a potential to reach $100 a barrel and beyond if unrest in the middle east continues.

Time to buy bullish oil ETFs is now! Seriously!


For instance the OIL ETF has surged to 4.83% (see chart below), and will trade even further as more unrest in the middle east is on the horizon.
The OIL ETF on the chart below;

Second, the USD index. Investors are returning to the safe haven of the US Dollar, trading around 78 points now this index is a bargain! For cautious investors like myself, take out an bullish options position (call option) on this index with an expiration of no more then 2 months.
If you are trading Forex, a bearish position on the EUR/USD wouldn't be unwise. This pair could pull back very fast if turmoil in Egypt keeps up.
Here's what the USD index looks like right now (this time I put the RSI behind the index to indicate the undersold condition of this index);

Here's another one for you if you're interested in Egypt if it was trading like a stock: the Egypt ETF (EGPT).

This one is certainly on a crash course if you ask me! I recommend to keep a close eye on the news coming out of Egypt, but so far it's not looking too good! A 'throw off the cliff' situation is exactly what happened here; take a look at the chart below.

With such heavy volatility and an RSI indicating such a tremendously low point (one I've never seen before in an ETF like this) it might be a good idea to be bullish on this one. The reason I say that is the last strong candle of the chart above indicating a reverse trend. This is pure fundamental analysis at this point. If the opposition leader in Egypt gets into power and the current president Muhammad Hosni Sayyid Mubarak is out, this ETF can trade much, if not alot higher.

All these trade recommendations above are what I like to call 'high probability trades', which means that it's highly likely these 'predictions' will follow through because of the social, fundamental economic and environmental circumstances.

Keep in mind, Oil prices, the USD index and the Egypt ETF. 

All bullish.

Verizon (VZ) gets iPhone; BUY BUY B.., or not yet?

Verizon has surely dominated the (financial) news channels lately. Soon Verizon (VZ) will be getting the tremendously popular iPone4 on its powerful network, available to some 93 million customers. Verizon stock (VZ) is currently trading around $35.47, but for the past few days, even after the announcement, the stock has been trading lower. Mainly because, first of all, the iPone is not yet on its networks until February 10th 2011, and second, most people that already have the iPone4 are locked in a contract with AT&T (ATT) the current (and only) provider of the iPone. Should you buy this stock now? Or wait to get a cheaper price? When it comes to technical analysis (as shown below) it looks like traders are preparing their setups.

The stock is still well in its Bollinger band range. Any price within it I consider a 'fair market' price. For short term traders the call option chain on this stock looks very attractive although I think it's a great stock to own for your buy-and hold strategy portfolio. This stock has great potential for growth. Short term and long term. The question is, what would be a good entry point. In case of Verizon, it's a great question. That depend of course which indicators you use and hold value to. If you already bought this stock, you're ok, I think if you wait a little bit for it to go cheaper, you're better. For me I'm going to wait until I see unusual trading volume. Definitely a buy!

Should Facebook go public or stay private?

The Wall Street Journal recently announced that there is a good possibility that the popular social media website Facebook will go public in 2012. Which means a publicly traded stock. If that's the case I'm going to be one of the first to jump on the bandwagon from a traders perspective. Already my broker Zecco  is adverting on Twitter through a sponsored link to own a small stake of Facebook through $GS. Seems to me they are targeting to investors to own a piece of a pie that hasn't even been baked yet, signaling a already huge demand for the actual stock.
Owning this IPO (Initial Public Offering) at launch is I think something that almost every investor is dreaming of! 

However, there are some advantages and disadvantages for Facebook itself to go public. The number one reason if Facebook will go public (if it does next year) is to raise extra capital, something I don't think they lack of right now and I think could be one of the reasons why they are holding off the thought of going public any sooner. 

On the flip side, it could be that the revenue figures aren't as great as everyone thought.

One of the disadvantages of going public is, and I would like to elaborate on this a little more, is the fact that they would have to open the books, to investors, traders, the competition, to anyone. On top of that there will be a constant pressure from investors to perform. Is that something Facebook wants to do deal with? 

Mark Zuckerberg, founder of Facebook already stated that he doesn't want to deal with the responsibilities of becoming a CEO of a publicly traded company. Facebook is an incredible phenomenon and I enjoy it very much myself and use it daily, no not only for CityVille!. I think it's a wonderful tool to stay in touch with family and friends and make new connections. In other words, it runs pretty well the way it is. 

Making it public could intervene with the 'functionality of the overall system', if you know where I'm getting at. I'm afraid most features on the site won't be free anymore and we will see a lot more banners and other sorts of advertising to raise revenue even further then the previous financial report to make shareholders happy. 

Then again, Facebook is holding a huge amount of personal data from users around the world. By now shouldn't they kind of have the obligation to make their books and intentions public?

Making it public will sure fill the pockets of many investors but will this be such a good idea, or am I over thinking this?

Now that we are on the Facebook topic, why not become a fan of my facebook page!

What do you think? Should Facebook become public or stay private?

Time to buy the following ETF options

This is what I did to diversify my ETF option portfolio in a single trading day to limit risk. Let's say when after analysis you came to the conclusion a trend may be forming in a certain sector you can buy or sell different investment vehicles that are somewhat correlated with each other, I usually do this within the same day.
The Dow slipped below 10k today, crawling back up closing at 10,060. The index has lost a lot of points over the last few days as a result of missed estimates, probably the biggest one being the housing market. Despite all the negative news it managed to maintain a close slightly above the 10k mark. To me, this is an indication the DJIA is trading around psychological levels. In fact, given all the doom and gloom out there at the moment I was quite surprised about the 'minimal' losses the index endured signaling an uptrend soon.
As I am talking about this index it makes sense to focus on an ETF that tracks this index (DIA) and ETFs that correlate with it. My picks are; DIA, SPY (S&P 500), QQQQ (NASDAQ) and the FXE, and their associated option contracts. All of these are Calls, even the FXE (tracks the Euro) that has the tendency to move upwards when the Dow moves in that direction too.

Take a look at the chart below;

From that, I bought  the call option DIA1018I100 which mean it will expire September 18, for the purchase price of $2.34, trading around the close at $2.60.
The same goes for:

• SPY1018I109 @ $0.86, now @ $1.05
• QQQQ1018I44 @ $0.94, now @ $1.13
• FXE1018I126 @ 1.60, now @ 1.53

As you can see, I'm losing a bit of money on the FXE option, but that's not as big of a deal since I made a profit on all the others. Besides, I still have until the 18th of September to decide whether I want to sell the option or let it expire. I usually hold on to these unless something drastic happens, which is not often the case.
There are tons of other ETFs out there that are somewhat correlated with each other. Like Gold and Silver, or Oil and the USD Index. If one investment goes up, the other might veer off the path a bit, but it's not like you put all your eggs in one basket, and if you're right, all your investments will go up!

I switched to Zecco

After extensive researching other brokers like Scottrade, E*Trade and a few others my vote fell with Zecco. I finally switched to this 'deep discount' broker for all my trading needs. Yes all, they even offer Forex trading so I didn't see any need to stick with my old broker that just specialized in Forex trading, in the end it doesn't make any difference anyway. They're both the same price and have the same spreads on all major pairs.
What I'm really excited about is stock, ETF and option trading though them. I'm going to shift more towards these trading instruments since Forex trading, my main occupation at the moment, carries too much risk, and since the CFTC changed the leverage policy, the reward isn't what it used to be. I will still be trading Forex and give trade recommendations on the website, but be prepared to see more information about for example stock alerts, and articles about general investing in stocks, ETF's and options!
So far, I've been very pleased with Zecco. Their research instruments are far beyond what I have seen on any other website and their community is fantastic too. I'll probably be sticking around for a little while.

Investing with money you can't afford to lose...

Many people who are interested in investing but have some sort of unsecured debt, like credit cards, personal loans or medical bills, are eager to jump in the markets. It's a very attractive world when they hear how much money can be made. They hope with the possibility of a high rate of return they quickly can pay back all their debts and live debt free after that.
Wait, you are worried about your credit card bills and you are thinking about investing?

Possibly one of the biggest mistakes you can make. You should use the 'extra' money to make bigger payments on your credit card bills to pay them off quicker. In almost every single book I have read about investing there is a chapter devoted to the number one evil for your wallet: high credit card debt or any other unsecured debt. They write about it like it is Satan himself...and I happen to agree with them. Credit card companies should be outlawed if you ask me.
Credit cards only work when you are able to pay them in full every month and take advantage of the air miles, points or other benefits that come along with it.
Unfortunately that is not always the case, the 'instantly owning money' gratification to pay off other bills or get that item you always wanted right now instead of saving up for it, is what lures many people in to applying  for a credit card.
However, if you make only your minimum monthly payments, unsecured debt essentially bleeds your finances dry over the course of your lifetime. Of course, this depends on how much debt you have and at what interest rate. Calculate how much you have paid in interest so far by having a credit card and you will be unpleasantly surprised. All that money could have been saved or invested. Sure you got a great deal when you first signed up for a credit card, but once you accumulated enough debt on the card to a point where it is difficult to pay back the full balance every month credit card companies pretty much can do whatever they want with you (Yes, even with the new credit card laws that are in effect). They work their way around, in order to make it still a very profitable business for them. After all, shareholders are knocking on their doors to see the quarterly results every time, and that can't be less then what it used to be, right?
Some debt is good. Secured debt, that is: a mortgage, a car loan, etc. Those are things we need in life and are in a sense 'healthy debts'. And some unsecured debts as well, if you can afford to pay off the balances every month.

Depending on your APR and how much credit card debt you owe, it can take up to 40 years or beyond to pay them all off in full! Think how much money you are throwing away paying interest alone! It should be illegal, in my opinion. But there is a solution!
Debt settlement (another word is debt negotiation or debt arbitration)  is an attempt to settle debt with the creditors. There are companies out there that specialize in settling unsecured debt, personal loans and medical bills. Companies like Exodus America. What they do is negotiate the debt with the creditors, which at that point the creditors are more likely to co-operate to settle the debt for less. In the event of bankruptcy no one gets any money. If you have a lot of unsecured debt, and in the short- mid term you don't see you financial situation change or getting worse because of the debt, you may want to consider debt settlement. A better option than bankruptcy, which can go on your credit report for 7 to 10 years.
Example, if you owe $10,000 in debt, they may be able to negotiate it down to $7,000 or less and make the payment into one lump sum, payable over 3 years. Of course each individual case is different, a reason why debt settlement companies do free consultations.
However creditors are likely not willing to negotiate the debt if you make your minimum monthly payments. But if you have fallen behind and late fees, overdraft fees and other charges have accumulated, debt settlement may be a good option for you since they are more likely to work with you.
One company I recommend you should consider settling your debt is Exodus America like I mentioned before. They have debt relief programs available, free consultation and free credit reports. What have you got to lose? Exodus America does debt consolidation and free credit counseling so you can pay off your debt with 3 years for example instead of 40. Think about it. Debt free? Starting over, saving the money you normally would have paid a credit card company? Then you can invest that money, and you can make lots more of it, instead of paying the credit card companies. If you have a lot of unsecured debt and you are having trouble making the payments, don't even consider investing. Rather put the extra money you have and pay off the balance of your credit card. Then come back to trading and investing. Exodus America may be able to help! Really.
Check them out on http://www.exodusamerica.org/