Introduction
If you are an experienced forex trader, you will know that there are quite a few different markets that you can trade nowadays.
The easiest way to start trading the markets is to open an account with a forex broker, and open either a long position or a short position on one of the major currency pairs, depending on whether you think this pair will rise or fall in the immediate future.
By doing this, you may find yourself opening one or two trades a day, or maybe just one or two trades a week if you wait for the right opportunities to come along that have the highest probability of success.
However if you are a short-term adrenaline junkie who wants to trade all day long (with the aim of making a lot of money), you can either scalp the markets looking for a few pips profit per trade, or you can trade the 5-minute binary binary markets, which is what I want to discuss today.
A Guide To Binary Betting
Binary betting has really grown in popularity in the last 5-10 years, with more and more companies starting to offer this service.
IGIndex, for example, offer 5-minute binary markets on the major currency pairs, as do a few other companies, and there are also companies who specialize in offering these binary betting services.
The good thing about these markets is that they are really easy to understand. A new market is created every 5 minutes, and it is settled on the closing price of a particular pair at the end of that 5-minute period. You simply need to predict whether the price will finish above or below its opening price.
The quotes will be between 0 and 100, and the markets will be settled at either 0 or 100, depending on the outcome.
So if the GBP/USD pair opens at 13510.5, for example, like the current market I am looking at, the quote for the price to finish above this level after 5 minutes may well start at 48-52.
Therefore if you think the price will rise in the next 5 minutes based on your short-term technical analysis, you could choose to stake £1 per point at 52.
If you are correct and the price closes at 13513.5, for instance, the market will settle at 100 and you will bank £48, ie (100-52) x £1.
If the price closed just 0.1 pips below the opening price, however, you would lose 52 times your stake, ie £52, because it would settle at 0.
How Profitable Are These 5-Minute Binary Markets?
Having just described these 5-minute binary markets, I have probably made it sound like an easy way to make money, but the reality is that it is fairly difficult to make consistent profits trading these markets.
That’s because you will find that the quotes change at exactly the same time as the live prices, so you cannot gain any kind of edge there.
You will also find that there is no easy money to be made by backing so-called certainties. For instance, if the price suddenly moves 4 or 5 pips higher with just 2 minutes left, the quote will instantly reflect this fact and may suddenly change to 92-98 (or higher).
So yes you could make 2 times your stake by taking the 98 quote, but you could also lose 98 times your stake if a quick reversal happens, which does happen every so often. Just one of these reversals could wipe out any previous gains trading this way.
Profitable Binary Traders
The people who tend to make the most profits from binary betting are those who are able to anticipate price moves before they occur. By doing so, it is possible to take positions in the 30-70 range before the big price moves occur, and either let them expire at 0 or 100, or close them out for a small profit, which is also possible.
My Own Experience
I myself have dabbled with these markets on a few occasions, and personally found it to be very difficult to make consistent profits. The major problem is that technical analysis doesn’t always work that well on the shorter time frames because many of the price moves that occur during the day are fairly random and unpredictable.
The 20-minute, 1-hour and daily binary markets, where available, are a little easier to trade because you have more time to analyze the charts and predict future price moves.
However I myself still prefer to open long and short positions in the usual way, rather than trading these binary markets, and although it’s a lot of fun, I wouldn’t really recommend this form of trading to other forex traders.
Ultimately it is of course up to you. There are people out there who make money trading the 5-minute binary markets, but it is a style of trading that requires a lot of skill and carries a lot of risk. So it is definitely not for everyone.
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