Trading binary options on futures allows traders to limit their risk, especially during the US Market opening, which is the most volatile.
Trading Binary Options on the Dow and Nasdaq
The video below shows the opening trades on binary options for both the Nasdaq and Dow Jones. The binary option that is available during this period is the 8am to 10am expiration (New York time). Both the 12 and 45 minute indicated that the market would go down at the open. Although price initially went against the position, any loss was locked in when the trade was entered. That is the beauty of the binary options — you actually lock in the loss when entering.
The risk on the US Tech 100, which uses the e-mini Nasdaq as the underlying, was $50 per contract. The risk on the Wall St 30, which uses the e-mini Dow Jones as the underlying, was $52.50 per contract. The exchange fees are $1.80 roundtrip per contract (if trading less than ten contracts). A profit target was set at $10 on both trades. The profit target was filled on both trades locking in $40 per contract on the Nasdaq and $37.50 per contract on the Dow.
Why would the market go down at the open? Easy. The higher timeframes (45 minute chart) showed that congestion dots had formed. Typical behavior is that price will bounce down off the 45 minute congestion dot to try and test the average true range stop. This is a pattern that is repeated continuously throughout the day and week. In fact, once you begin studying the congestion dot and average true range algorithm that is incorporated within the Trend ATR indicator for TradeStation, Multicharts, and NinjaTrader, then you will find that it, in essence, highlights the market wave patterns.
The TradersHelpDesk Silver Package includes everything traders need to get started with the indicators.