Trading the indices using binary options allow you to limit your potential loss (risk) during volatile markets, while still participating in the markets during these periods.  For example, this morning both the Dow and ES indicated a big move to the downside.

Trading the indices using binary options

We shorted the Dow Jones binary option at with a risk of $10.75 and the ES with a risk of $9.50.

Trading the indices using binary options the strike prices were:

  • Wall Street 30 17630
  • US 500 2063

For those subscribers of the Futures and Binary Options trading room, I told to set a profit target to capture $30.25 in profits on the Dow and $30 in profits on the US 500.  For those in the room, I showed how you can remove your profit target provided:

  • You can read volume
  • You can check your charts throughout the day

If these conditions were met, then you could potentially stay with the trade for the duration of the day.  If price expired “in the money” the risk to reward would be substantial.  Risking approximately $10 to make $90.  Since I was trading all day today, I opted to stay with the binary options, as well as trading the 3 minute chart to the downside (which also gave beautiful entries).

Trading the Indices Using Binary Options Dow Jones

Trading the Indices Using Binary Options ES

Why anticipate this type of movement?  Because this down move was supported on higher timeframes.  When you have higher timeframes supporting this type of move, it will typically be substantial.  That means that we could be very far out of the money and simply read the volume on the charts.  The only danger to the trade came in at around noon on the forty five minute chart.  The sellers actually gave buyers a chance to come in and they failed miserably.  In other words, sellers offered it to the buyers and they didn’t want it.  They have to slash prices more and they did.

I’m now long on both since the ADX magenta peaks are coming in and may even trade through the Asia session.  It’s a great day to be trading!