Trading into trend with the Emini Dow Jones, while everyone is screaming that it will go down, is easier with binary options because the trader limits their risk on entry. In other words, if the Dow decides to change course, then the loss is limited to what was paid on entry.
Trading Into Trend with Dow Jones Binary Options
The daily Dow chart showed a trend divergence but the average true range was holding price up. That typically means that higher highs will be made. Going down to a 3-minute chart, there had been numerous trend divergence prior to the opening but the average true range stop held each time. Instead of fighting a strong trend, why not lower your risk using an out of the money binary and let the trend be your friend? In this case, I entered an OTM at Wall St 30 > 20981 for 10am expiration, trading into trend.
The risk on the trade was $30.25 per contract. Price expired greater than 20981 and the full profit was realized ($69.75 per contract).
Will the Dow go down? Probably but the charts were not showing that today and, instead of standing aside, Trading into trend using binary options allowed me to capture profits while waiting for additional indications that the Dow would in fact go down.
The Out of the Money binary options provide an ideal environment for using low risk high reward opportunities. Since each binary has a maximum payout of $100, the trader has more reward (typically around $70 after the risk) than risk on the table.