The Story of the Japanese Trader
There was once a man, a man living in Japan, born in Japan and raised in the traditions of his ancestors. This man held a deep conviction for the beliefs and system of the samurai and was intrigued by how those traditions had carried over into the business world. More importantly, he was fascinated by the financial markets and even more specifically to the candle sticks. The candle sticks told him a story, it was the story of his people as they built their country, suffered from economic stagnation and then began to build their way out of it. Not only that the candles had names like Harami, Doji and Hanging Man and were used in strategies such as Ichimoku Hiyo Kinko and Getsuga Tensho that caused him to dream of the days when the samurai wielded swords, not options.
Our trader, Haruto, learned all he could about the markets, trading, charting, technical analysis, candle sticks, strategies and the ventured out into the market confident of ability. Haruto tried his hand at trading equity options but found the weight of delta, theta and vega too much to overcome. After a fruitless and frustrating attempt at trading that nearly wiped him out Haruto took a break and turned his attention to futures and forex, thinking that spot trading would be much better than trying to leverage the stock market. After a brief hiatus Haruto returned to the markets, opened his margin account and began to look for a trade. After a few initial successes Haruto soon found himself subject to a margin call and once again washed out of the markets. He was, as you can imagine, completely upset with himself and unable to understand where he had gone wrong.
He had a firm grasp on the fundamentals of the economy. He was familiar if not an expert on individual candlesticks, multi-candle formations and price action analysis. He used a combination of time frames and indicators to get his signals and even used sound money management techniques. He knew better than to expose himself to too much risk. He just couldn’t figure it out and then one day he realized it was not his analysis, because the markets always seemed to move in the direction he chose. It came down to the vehicles he was trading. Each type of asset came with sandbags that provided enough slippage to overcome even savvy traders. Equity options are subject to time decay and other factors that can drain the value of an option even as the underlying asset moves in the chosen direction. Spot trading, while free of certain adverse factors, opens up an avenue for loss that is near limitless. Even with sound money management and stop losses the market can gap widely from day to day, especially when driven by unexpected news, and blow right past a stop loss order before the fasted computer can execute a trade.
The Binary Options Solution
One day, soon after Haruto made his realization, he stumbled upon binary options. He had heard of them before but dismissed them like so many trader have. He discovered however that things had changed since he had first heard of them. For one, binary options were now a regulated financial asset in his country with oversight from the Japanese FSA and safer banking practices. Well, that new piece of information was reason enough to learn more and Haruto soon found himself opening a demo account to see what binary was really about. What he discovered was the answer to his question; How can I trade and overcome the obstacles that have kept me from profits? Binary options was it. Each trade he entered he knew exactly how much it would cost if he lost and how much he would profit if it closed in the money. Not only that there would be no margin calls and no option Greeks to suck the life out of his account.
After saving enough money to open an account and use a measure of money management Haruto funded his binary options account. He was still held trepidations about trading, like a child who has burnt his fingers on the stove not once, but twice. Haruto traded cautiously, making small trades but lots of them as he discovered signals. He used longer expiry times than he had in the past, focused on short term trend following techniques and slowly built up his account. One day he realized he was trading too small, his account had more than tripled since he began with binary. He upped his trade size and consequently, because he was profitable in the long term, his account grew even faster until one day his trading was equal to his work pay. He told his boss he wanted to go on part time. He took his wife on vacation. He kept on trading on you want to know what? Haruto is a millionaire now, a binary options millionaire.