Category Archives: Binary Options

Articles, posts and updates on binary options, trading and the state of regulation.

These rowers practice for hours in order to pull the oars in synch

Is Demo Trading Worth It

My Answer To The Question, Is Demo Trading Worth It?

I have to say that yes, demo trading is worth it. It is the best place to get real world trading experience and a tool I still use today. Yes, the giant of technical analysis and trading that you see before you is indeed a demo trader. I do it for a number of reasons but the top of the list has to be for safety. Demo trading provides a level of safety for my real-money account that you just can’t get anywhere else. Why is this? It is because I know better than to experiment, test or make wild speculations with my real money. Having the demo account provides a place for me to make those trades that don’t fit my general strategy thereby providing a layer of protection from the market and from myself.

Practice Makes Perfect

There are a number of reasons why demo trading is important. For a newbie it is important because it is where you learn the mechanics of trading. Trading demo answers a lot of questions, questions like what is a position, how to you buy it, what does it look like when it’s open, what does it look like when it is closed, how does money management work, how does money management affect my trades and many many other questions a newbie or inexperienced trader may have.

  • Look at the picture above. I choose this one because it is a great example of how demo trading can help you get in synch with the market. How  many hours of practice do you think these guys put in to be competitive?

Once the mechanics are learned, the demo account does not lose its importance. It also provides a training ground and launch pad for trading real money accounts. The novice trader can use the demo account to practice strategies, learn and study the market until they know it inside and out. A friend of mine, Okane, recently said something that I have found to be perfectly true. Trading the demo account, and studying the market, can help you develop a kind of sixth sense that will lead you to more profitable trading.

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That is another top three  reason why I like demo trading. It helps you get in tune with the market. I can readily admit that I am not always in tune with the market. Sometimes I have winning streaks, sometimes I have losing streaks. The demo account helps because when I realize I am on a bad streak, or just out of tune with market direction or churn, I can switch and start trading there. Then, when I am back in tune I can move my trades back to the real money account. Believe it or not this is a really valuable tool but one that requires a certain amount of self control to use.

The number one reason I like my demo account is for accountability. It’s very easy to look at a chart and say, “I think the market is going up” or “I think the market is going down”. It is something else entirely to to say that and then act on it. Even writing it down is better than nothing but with a demo account it more real. You see the trade in the account, you see if it wins or loses and you see if your balance draws down. It may be a fake balance but losing points is losing points, if you want to win as a trader then you have to be able to win with demo money as well as real money.

Where To Find Quality Demo Trading

Unfortunately most binary options brokers don’t have quality demo trading. If they do it usually comes with a catch. Communitraders 2.0 is the demo trading platform I use for binary options. It is full service social trading platform that is completely free. It includes forums for talking to other traders but more importantly a complete demo service.  The platform is intended to be compatible with most binary brokers so you can trade calls/puts, one touch and boundary options on a full list of assets with a wide range of expiry. If you want you can keep your trades to yourself, and track them on your profile page, or you can share them. Sharing them means other traders may ask you questions or give advice, or just say “hell yeah, great trade!”.

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You can also start a trading diary or blog with the platform. All that takes is starting your own thread on the forum. This is what helped me get really good. Not only was I keeping track of trades on the demo, I was putting them out there for all to see. This made me focus twice as hard on making good decisions, use proper money management and being as right as I could be with my analysis.

Communitraders  is looking for traders, demo users and bloggers right now. Here is a link to more information.

Bloggers Wanted!

Tips for successful trading

Some Tips For Successful Trading

Get In Tune With The Markets

This is a list of some tips I have developed over the years to make sure that my trading is successful. I know that I can never expect to win every trade but I can strive to win as many as possible, to limit my losses and basically to make sure that I am as ready as possible to make good trading decisions.  I have categorized my list into 4 sections; longer term prep, short term prep, what you might not consider and things I never do.

Longer Term Preparation For Trading 

  1. Education is the root of success for any endeavor. The more you know, the more you learn, the more you mature as a trader the better you will be. Education is not limited to tools or strategy but also includes fundamental analysis, market mechanics, economics, trading psychology and any other subject that helps you to grow. Education never should never stop, you should always seek out new information. Each new angle you learn will give you a new insight to the market.
  2. Strategy is how you make trades. Your strategy is the framework that guides your actions.   I always stick to my strategy to ensure that I am not making random or knee jerk trades. It’s OK to use more than one strategy, or a combination of strategies so long as you can keep them organized. Using a different account for each strategy is one way to do it.
  3. Money management is how much I trade. Money management is the key to long term success no matter how good a trader you are. By keeping your trades small you never risk your whole account on one trade, or one streak of bad trades. By keeping your trades set to a percent of your account you can make sure you never trade too much while also allowing your trade size to grow with your account. The average successful trader will risk between 1% and 5% of their account. 1% is a very low risk tolerance,5% more risky. I use the 2% rule as a standard for the Geek Account, my weekly tips column on
  4. Fundamental analysis is the study of the economy, business and market conditions. It is crucial to understand the underlying fundamentals of the market in order to better understand trend and how the market might react to a change in those fundamentals. I follow economic data on a week to week basis, it’s not important to become an economist, just to keep up with it the same way you do the local sports scores. Think of it as keeping score on the economy, when things are good the bulls are winning, when they are bad the bears are winning.

Short Term Prep 

  1. Checking the news is the first thing I always do. I use a variety of sources including email alerts, a news app on my phone, the TV and the internet. I always wake up, at least on trading days, by 8AM eastern time so that I have time to catch up on it all while drinking my coffee with leisure. I check up first on Asia, because the trading day starts in the East. I move on the Europe because those markets are open in the early part of my day, ahead of the US open. After that I move on to domestic news and then drill down to any specific reports or stories I want to know more about.
  2. Checking the charts is the last thing before making a trade. I browse through, always before the opening, looking for the asset I think is best for day trading and longer term signals for the Geek Account. I am a trend follower and make all my trades based on trend following signals, which include corrections and reversals, depending on the time frame, asset, analysis etc. I never force a trade on a chart, either it’s there or it isn’t. If it isn’t then I move on to the next and the next until I find the one I like all the while waiting for the signs to develop.

What You Might Not Consider 

  1. Rest is very important to trading well. Staying on top of the market is mentally challenging and requires plenty of sleep and good nutrition.  You need to be sharp and staying up late is not how you stay sharp.
  2. If you treat trading like a hobby, or a game, it will treat you the same way. Hobbies may make you money but you don’t get rich on them whereas a game, if you lose who cares, it’s just a game. If you want to have real long term success you have to treat trading like a business, make good trading decisions for your business, manage your business’ money well and it will take care of you well.

Some Things I Never Do 

  1. I never let my account balance influence my trading. It is easy to be tempted to trade too much, or too often, or too risky, or all of the above, for both greed and fear. If you are winning a lot you may want to win more, and more. If you are losing a lot you may want to try to win it back quickly. You need to know your balance so you can apply money management but you must always follow your risk management rules.
  2. I never let my open trades affect my trading decisions. Sometimes I may have 5 or even 10 trades in the red. This can be quite discouraging and I admit, is something hard to ignore. I don’t ignore it, I just don’t let it bother me. I know that over time I win more than 60% of the time, I also know that my money management is protecting my account like it always does. I usually don’t even know that I have a losing month until after it happens and I tally up all the trades that closed in that month.
  3. I never trade more money than my risk percent. I never trade less money than my risk percent.  I always trade my 2%. If for some reason that I can’t trade exactly that amount (broker trade size/increments for example) I will round up, not down.
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Fundamentals Drive My Trading

I began trading with the idea of using pure technical analysis. The basic tenets of TA, that all things are known by the market or will be known, and all that knowledge is represented in the charts, was a big draw for me. TA broke trading down to simple price action, technical indicators, candle charts and I was enthralled.

However, over time, I have also come to love the fundamentals and view them as a primary driver of my trades. If the trend can be likened to the tide in the ocean, the fundamentals are the ocean itself.  The fundamentals lay the foundation for the house to be built on, they prime the canvass so that the master can create a painting and are the waters from which the market tide will flow.

My description may sound esoteric and philosophical but its true. Imagine a foundation being laid for a new building. As more and more details about that foundation become apparent you get a feel for what the building is going to be. Each brick of the building is important, and adds to the whole, but on an individual basis means very little in terms of what the building will look like. The foundation, the fundamental basis the building is built on, gives the building its character. Is it a house, an apartment building, an office? Once you get a feel for what the building is going to be you can start to make educated guesses, speculations, about what it will look like, how many rooms it will have and when it might be finished. The same is true for the financial markets. When you have a grip on what the fundamentals are you can make better speculations on where the markets are going.

What Is Fundamental Analysis

In terms of trading, fundamentals can refer to a couple of different things, depending on which market you are talking about.  Sometimes there is more than one fundamental driver of an asset, sometimes those drivers are in line with each other and other times not. For a stock fundamentals can include the state of the economy, the health of the business, revenue, product pipeline, consumer sentiment, inflation and other economic indicators. For a commodity supply and demand is the biggest fundamental driver although economic conditions have a lot of affect as well. These factors are used to determine if an asset is under, over or fairly priced.

Fundamental analysis also ties into the greater market cycle. The economy cycles between growth and recession and those cycles drive market values. GDP, Gross Domestic Product, is one factor that can be followed as an indicator of the greater market cycle. This is the sum of the output of a region, a country or the world.  Rising GDP, expanding or contracting GDP growth and expectations for growth/decline can affect prices from the near to the long term.

Another thing to consider is how fundamentals affect individual assets. A bullish economy may be good for stocks but it is not good gold and can be both good and bad for oil. Rising GDP and rising GDP expectations are closely associated with a rising stock market. Rising GDP is also associated with rising currency value. When a country is doing well its money becomes stronger.

Within the GDP data, which is usually released on a quarterly basis with monthly revisions, are other fundamental economic drivers of the market. These shorter term data points are drivers of shorter term trends within the greater market cycle. Employment and jobs are perhaps my favorite but there are numerous gauges of inflation, manufacturing, housing  and the consumer that must also be included. Each of these gives a different view of the underlying economic conditions and has the power to move the market

How I Trade The Fundamentals

I like to keep abreast of the economics and the current data so I have a grip on what’s going on, a view of the foundations so to speak. I let the data come and the market do it’s thing. I don’t use any one data point as a trigger other than what the market tells me to do. I have a an understanding of the fundamental conditions but I still let the technicals dictate my trades. A rising tide of fundamentals will show itself in the charts in the form of an uptrend or bull market. As the fundamental picture unfolds there will be catalysts for rallies and corrections and all will be present in the chart as a signal in one form or another. When the technicals and the fundamentals agree, and the signals are in line I make a trade.

My approach to fundamental trading is exactly the same as technical. When the fundamental trends are up, I trade up, when the fundamental trends are down I trade down.  The technicals provide my signals, when they agree with my fundamental look I know I can make a good trade with confidence.