Is High Frequency Binary Option Trading a Good Practice?
by Adil Adeel
High frequency trading is only recommended for experienced traders. Many experts even have the opinion that this trading style is not successful with binary options. But experiences have proved that if implemented correctly high frequency trading can guarantee big profits with binary options.
1. Access to a completely functional auto trading algorithm is a must to implement this very advanced trading strategy. It is very challenging to implement this strategy manually so it is advised to avoid it if access to a fully developed algorithm is not possible.
2. A solid entry and exit strategy that is formulated considering your financial prowess
3. The current financial news
4. Analysis of Bollinger Bands and Candlestick graphs
5. (Optional) Visit online trader communities and discuss various ideas and opportunities
6. (Optional) A bonus strategy that can quickly amplify your winnings for a short duration
The idea behind high frequency trading is to enter and exit the market repeatedly, and very quickly, preferably in milliseconds, which is usually not possible manually. The required homework for each trade is the same as the simple trading which includes data analysis, signal spotting so it is very clear how much impossible it is to do without any auto trading service.
How to trade:
Using hammers and cups and handles would be the best choice to develop an implementable high frequency trading strategy for binary options. The above mentioned signals are easy to spot so using any automated trading software would be very convenient with them.
There are many patterns that can be successfully used for making in-the-money trades. Here is one of such patterns: The chart used for high frequency trading will have a red pointer denoting the hammer, and the blue pointer denoting the handle. The ideal market entry is revealed by the combination of:
• The moving average line signifies an upward trend
• The handle signifies the trading zone
• The hammer is the entry point
Wait for the hammer and enter the trade and wait until the handle meets the resistance line. Exit now.
As mentioned earlier, there are many more patterns which you can use to trade more conveniently according to your preferences.
Scope and hurdles:
Statistics show that more than 50% of the trading volume since 2009 has been made through high frequency trading. Such excessive amount of high frequency trades have created many problems for brokers as they experience serious liquidity issues. The famous Knight Capital crisis, according to Forbes magazine occurred due to trades happening in millisecond with the help of computers, in short high frequency trading.
It is this reason that most brokers right now do not support auto trading software. They consider this a serious act of manipulation and can even terminate your account and seize your funds if proved.
Even on some brokers that support auto trading software, trading in milliseconds would not be practically possible due to reasons such as server response delays, irregular service interruptions due to system overloading etc.
Apart from all that, high frequency trading works 100% with binary options but requires a high level of skills and understanding to pull-off successfully.
Adil Adeel - Senior Editor
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