Binary and forex strategy- thoughts

Hey everyone.

Heres a strategy that I have thought up to use. Please any thoughts and suggestions would be appreciated. Haven't actually tried it yet but here it is in theory. To do this you need a binary daily one touch for a currency pair which they have on IG markets.

The set up as an example (AUD/USD)

AUD/USD price- 0.8990
Binary daily one touch- 0.9000

Now the first step is to buy 1 contract of AUD/USD (i.e. $10 per pip) and set a limit at 0.9000 (profit= $100). The second step is to at the same time sell the binary one touch which from what I have seen the buy price will be around 90. Therefore selling it should be priced around 14. If you sell 0.6 contracts of the binary it will cost $84 (14 x 0.6 x $10 contracts). Therefore if the price of the currency moves to 0.9000 you will lose $84 from the binary but gain the $100 from selling the currency. Net profit= $16.

Now if the currency decides to move in the opposite direction then do these steps:
First step is to set a stop loss for the currency, this will be determined by the profit you get if the binary proves successful. Therefore if the currency moves the other way and doesn't touch the 0.9000 mark at the end of the day then your binary will be worth 100, giving you a profit of $600. Therefore you can set the stop loss for the currency at 59 pips. So at the end of the day if the currency drops 59 pips you lose $590 but you will get $600 from the binary. Net profit= $10.

Now of course there is no such thing as a free lunch. So the way that you would lose money in this situation is if the currency dropped 59 pips, then rose again another 69 pips to trigger the one touch binary all in one day, which would mean you would lose $674 ($590 from the stop loss for the currency and $84 from the failed binary). But if you could be pretty sure that the currency wouldn't drop 59 pips and rise another 69 pips all in one day, then it may be a profitable strategy. But it may be something that just works in theory.

Cheers :cheesy:

Just a thought, but if the spread on the currency pair is only 2pip, you are reducing your $100 profit to £80 which then makes this an unprofitable system. I think you could possibly rebalance it to work. The key is checking the pricing used, checking the spread (this can vary at different times of the day) and then finding an entry point.

hey , does this mean binaries are not profitable. i jus opened an account. i want to get into trading but not sure if this is the right route?

on this article, so u know what are best forex pairs to look for? http://www.dailyforex.com/articles/...ze_your_earnings_during_a_false_breakout.aspx

Binaries can be very profitbale. It is all dependent on your strartegy. Ther link above shows a good way of utilising there potential. I suggest that you research a bit more though before you start trading binary fx options. Once you get have an understanding of the general mechanics, you can really start to utilise things like this. Who did you open an account with? I would personally do a bit of paper trading or demo account trading before jumping it this though.

opened an account at www.startoptions.com but am on the practise mode not real money. I have practised a bit before on another demo account but i seem to be mostly guessing. thats why i like this break out strategy... is tehre any pairs u recommend me looking at first?

EURUSD and GBPUSD are probably the most liquid pairs. I'd try and stay on the main currencies rather than the cross rates. If you're going to trade breaks out, check out NewtronBombs posts. He has a really good break out strategy. Also get reading some technicals books.

thanks, i will let u know how it goes

how do i find posts?