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By: Adam Stone
January 24th 2014 7:45am GMT, London UK

Asia is pulling down the world at the moment as China’s manufacturing sector is raising concerns for the global economic situation. As a result, the Asian markets just hit a 4.5 month low and US stocks dropped as the specter of uncertainty is rearing its ugly head again. Only difference is that now this uncertainty is turning into a clearer picture of general malaise in the markets and binary options traders have taken notice. As we’ve explained in earlier editions of this daily analysis, binary options traders tend to steer clear of indices as things turn sour. On some level, this is becoming an incredibly powerful bellwether of future developments in the indices across the globe. As we see the current down-turn, we can say with relative certainty that binary options traders foresaw this.

How do we know? Simply, since last Friday, the volume on indices with binary options has precipitously dropped. According to Jared McKinney of the GOptions dealing room “binary options traders seem to have an astute ability to keep away from the most maligned assets in the markets. Since Friday we have seen a 82% drop in general index based volume while forex volume has held steady and some pairs have even increased steadily in volume. In other words, as the market heads down, binary traders run for cover but only as it relates to indices. It’s actually an interesting development seeing as how with binary options, traders can earn on both directions based on the same payout. But what this means to us is that due to the strong uptrend, binary options traders are showing there displeasure with any strategy that could possibly be adopted in a contrarian method or direction to the general trend.”

It is pretty clear that this trading behavior doesn’t exist in stocks or forex pairs. So what does this mean to us as traders? It simply means that with wider scoped assets like indices, we can sense trouble even if it doesn’t translate into positive trades. In other words, by providing you this indicator, binary options traders can or should rather take advantage and immediately look to those asset you do in fact feel comfortable with during such periods and not try to fight it, because you are probably correct in your “hunch” that trouble is brewing.

For the day ahead, keep an eye on the surging EUR/USD pair. With the USD losing this much ground, 2 scenarios are possible.
1. The market might push to 1.3710, which is the current resistance level whereby any test will allow reversal strategists to take down options on each test. Just be ready to go big once a break occurs, if of course it happens. Reversals in this scenario are relatively a low risk endeavor at least in relative terms. However, a break would be considered a very low risk trade by any standards
2. The USD retreats and heads back down before any test is made. Be wary of this scenario. Should get your spidey-senses tingling. It means no trading at least the way we see things today

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Adam Stone
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Adam Stone

As COO of GOptions, my first and foremost goal is to provide traders with the most up to date info from the markets. I have been trading the markets since 2004 and have been involved with stocks, binary options, and forex trading since then. I have had no formal market education and pride myself on a self taught approach to everything related to trading. I try to focus though on both the technical and fundamental aspects related to each trading day and bring forward the most important aspects of risk/reward in the market.
Adam Stone
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