Timing and Managing Trades During the Week-Binary Strategy

We have considered event risks as triggered by political and market-driven events. But there is another kind of event risk—the days of the week. The process of analysis is important, but the probability of success also depends upon timing decisions. The trader has to learn which strategies work better on which days of the week.Contrarian Mondays Monday mornings (3 a.m. EST) are when the binary option trading week essentially begins.

Monday mornings represent, perhaps, the best opportunity to be a contrarian. The distance in time from Monday morning when markets in Asia open to Friday afternoon when the U.S. equity markets close provides a great deal of room for the unexpected events and changes in the mood of the market. Abraham Lincoln referred to the silent artillery of time as one of the most powerful weapons. It is true for traders. Time fuels hope as well as delusion.

The initial opinion polls that form around a binary option strike price on Monday morning are the most likely to change and be wrong. The market mood formed on Monday mornings is based on lagging information from the events of the previous week. The previous week’s reaction to news and surprises has had time to diffuse. The new week presents new potential for mis-speculation and misjudgments. This leads to good conditions for putting on high return trades, offering more than 100 to 500 percent returns for the week.

Monday morning becomes the best time slot for putting on initial trades.Initiating Trades on Tuesday One strategy that requires some patience but can pay off strategically can be called . If Monday is the time when misjudgments occur, then Tuesday provides a reprieve. There may even be justification for waiting until Tuesday to do binary option trades. The rationale is that there is a value in waiting for more information.

By Tuesday, initial assumptions about the week have been absorbed by the market, thereby offering less risk.Less risk, however, may mean lower returns. Putting on a trade on Tuesday offers less probable opportunities for 100 to 500 percent binary settlement values. Even so, on Tuesday, $30 to $45 ask prices still provide excellent return potential.Surfing the Volatility Wave: At-the-Money Wednesdays By Wednesday, the market has had time to absorb news. Price patterns have had time to solidify or probe their important levels of resistance and support.

Emotions have dissipated somewhat and often what was expected on Monday morning has just collapsed and gone the other way. But by Wednesday, it is midweek in uncertainty. This makes Wednesday a good day for at-the-money (ATM) trades.Going with the Crowd: Deep-in-the-Money Thursdays Deep-in-the-money strategies make sense on Thursdays because, by that time, the market has formed a crowd or consensus of opinion on many of the market patterns. By Thursday, an additional strategy unfolds in this scenario.

If the ask has gone to $75, the market mood is now definitely optimistic. It would take some new information, or event surprises, to trigger a reversal of the trend direction.With 75 percent expected probability of success, the very same crowdmind,which we tend to doubt as accurate on Monday, is much more reliable on Thursday. With only two days left to expiration, a binary option trade with a $75 ask represents a 25 percent return in two days.

Not bad by any standard.Last Chance: Very-Deep-in-the-Money Fridays Initiating a trade on Friday is appropriate for loading up on a position. By Friday, probability streams have narrowed and reduced the opportunities to very deep-in-the-money plays, such as $85 to $90 asks. This means the market is very confident of a binary strike price settling at $100. While such plays return zero to 15 percent in a few hours, they also risk 85 to 90 percent.

Trading this strategy requires a high level of technical confirmation.A different view of binary option trading opportunities is worth considering—the once-a-month trade. Once every month, the nonfarm payroll data release moves the markets. A breakout strategy put on for the first week of every month (since the nonfarm payroll report comes out the first Friday of every month) may be all you need to satisfy the challenge and excitement of binary option trading.