This is the Worst Binary Options Strategy Ever. Real Story Mate!
Binary Options Strategies… short term, long term, trend following, counter trend, strategies for currency pairs, for stocks. Oh, there are so may out there, some good, some bad and some just worse than a coin toss. Here’s the thing: if you find a bad strategy – and I mean really bad – that gives you the worst signals… losing trade after trade, then you actually stumbled upon a money making machine. All you have to do is buy a Put when your strategy tells you to buy a Call and buy a Call when you get a Put signal. Yep, it would be simple, but the problem is that bad strategies don’t lose consistently and don’t allow us to win by just trading against them. When I think about really bad strategies, I can’t help but remember an early episode from my trading journey. It involved the worse strategy I ever came across…
Plain Bad or Plain Stupid?
A long time ago in a galaxy far, far away…. I applied for a job as an assistant trader for a true professional trader. At least that’s how he introduced himself… and he also said something along the lines of: If you are here, you are probably not a very successful trader. I had a couple of answers for him, but I needed the job so I swallowed my words and continued with the interview and ended up getting the job. The next step was for me to understand his strategy, memorize all the rules and notify my “boss” when a trade setup was available according to the strategy. I am sure you want to know by now what the strategy was so I won’t keep you waiting:
In an uptrend, price makes higher highs and in a down trend, price makes lower lows (let’s keep it simple and just stick to an uptrend for this example). Another characteristic of the uptrend is that price breaks the previous high, thus printing a new higher high. Ok, pretty logical so far. But… the strategy required me to place a Put when price reached the previous high, hoping the trend would reverse from there. Open any chart, look for an uptrend and see what happens if you place Puts at every high when price gets there the second time. You will lose most of them, especially if the trend is strong, because, as I mentioned before and almost all of you know, in an uptrend the previous high will be broken. The strategy would make some sense if we would wait for some sort of confirmation like pin bars, engulfing candles, or at least an overbought sign.
At that point I started to believe I’m missing something. Although my trading knowledge was pretty basic at the time, I could still tell that something is definitely wrong with the strategy. Why go counter trend without any filters or additional hints of reversal? I have nothing against counter trend trading, but it’s obvious you need more filters than you need when trading with the trend. I tried telling the guy that I don’t think the strategy would work but all I got was something close to: Uh, I’m experienced and I know better. I’m a professional. Then I figured it’s time to take my role as an employee seriously and stop telling the guy what to do with his money and I thought: You want me to trade your money using this strategy? Fine, no problem with me, after all I am here to follow the rules. I started to trade under his strict supervision, always asking if the trade was according to the rules. Every time I would receive the answer “Yes, it is” I would go for it, never thinking about the losses that seemed to never stop.
Time to Pick a Better One
Day in and day out we kept on doing the same thing, going counter trend without something solid to back our trades. One day it hit me: that was the worst strategy I ever used… ever. Years later, it still reigns supreme and I believe it won’t be replaced any time soon. I don’t know if my former employer is still using the strategy or if he is even trading anymore, but what I would like you to know is when to let go of something. If it doesn’t work, don’t dismiss a strategy after the first couple of bad trades, but learn when it’s time to move on and try another one. You cannot keep losing and losing… and losing. That means something is wrong with the strategy you are using, so change it. Come on, doing the same thing will give you the same result more or less so choose a strategy from our School, test it and if it doesn’t work, change it. Don’t just lose your money!