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By: Adam Stone
March 27th 2014 7:30am GMT, London UK

Another day and another drop in stock prices in the US. We were beginning to get optimistic when Tuesday’s session headed back higher. But this, for binary options traders anyway, was nothing but a possible rouse by institutional investors to get better prices to go short. This occurs non stop all day long, but when you look at a longer term view of things, such “bluffs” are harder to perceive. It’s not entirely clear if institutional investors really like the downward trend or this was just a short term strategy made easy due to the susceptibility of traders to get behind any trend higher. We mentioned above though that binary options traders weren’t prone to this bluff.

The reason for this is that binary options traders have a collective phenomenal behavior of laying in wait while indices aren’t unable to head higher. In other words, while the indices aren’t trending 3-4 days of the week in the same direction, binary options traders are steering clear. This is an incredible behavior that is testament to the collective spirit of trading in general which is always after profits with the path of least resistance. What binary traders are sub consciously saying to us by staying out of the index asset class during times of tumult, is that they feel uneasy about the prospect of turning a profit. While this may seem completely illogical, seeing as how profits can be made on the way up or down in equal ease, indices have a predisposition to head higher on a yearly level. So when they don’t, stock traders try to capitalize and tend to lose while binary options traders, by staying on the fence, keep their funds safe.

The moral of the story here is that this behavior is incredibly smart. What we propose to our traders is to never enter the market without the momentum necessary to see follow-through on any trade. It’s also why we tend to focus more on break based strategies as opposed to reversal strategies. One good break can be far more lucrative than 10-12 tests requiring 10-20 trades to capitalize. The law of large numbers errs to the side of more trades. However, trading is not about quantity but strictly quality.

So on a day like today, with little in the way of news to get in the way of the price action on the screens, stick to break strategies on forex, commodities, and individual stocks while steering clear of the indices. Stocks like Facebook (FB), Apple (AAPL) and Google (GOOG) may all be on your watch list as tech stocks took a hit yesterday. Could be a nice rebound 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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