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Small and Steady During Times of Unpredictability

October 23, 2014 •

It’s been a bumpy ride for stocks the last couple weeks. One day the Dow Jones will be up 200 points, the next day it will be down the same. Triple digit motion is not uncommon in the Dow, but it’s also doesn’t happen every week, either. Motion is good a lot of the time since it means faster profits if you are positioned correctly, but this type of momentum has been uncertain a lot of the time, which means getting the right position is extremely difficult.
Markets are all over the place
The good news is that ultra short term trading puts you in a place where you don’t have to guess at the beginning of the day and hope for the best like a lot of day traders are finding is happening now. Instead of having to worry about holding in for long enough to make a profit, with something like a 60 second or five minute binary option, you just have to worry about predicting whether or not a prevailing trend will keep up with its dominance. In times like what has been going on the last couple weeks, this is actually much easier than it usually is.

60 second trades can give you fast returns, but unless you have sophisticated technical analysis software, these types of trades are really only 50/50 guesses. And with binary options, something that is a random occurrence is only going to give you a loss over time because of the gap between the profit rate and the loss rate payouts.

Be careful with these if you decide to use them. Unless the trend is clear and defined, 60 seconds is generally not enough time to get an accurate snapshot of a stock’s activity. Even advanced charts generally only update every minute, and 60 second options need more precise data in order to be traded accurately. The benefit of having stocks moving quickly is that the imprecision of this type of trade is overcome because of how fast the stock’s price is moving.

A well rounded trader with knowledge of momentum theory will fare much better than a one trick trader will in times of uncertainty. The trader that looks for a specific event and trades only that will have a few big trades every once in a while, and these will bring you big profits when they do happen. But the conditions for these trades might take a week or more before they are met, and if you are not trading with enough cash, you will not get as much out of this as you could. Having a broader sense of trading will give you many more trades, but they will be smaller trades. These are better for those individuals with smaller accounts. Depending upon where you land, you will want to adjust accordingly.

Another thing to consider is the fact that the well rounded strategy, the one that is able to profit in any market, will have a more consistent income. They will likely turn a profit month after month without many unpredictable ups and downs. The tightly focused approach will give you huge returns when it happens, but it won’t be easy to predict exactly when this will take place. Binary options are a great choice for the smaller, broader focus thanks to their high rates of return in all conditions. This type of trading has, in effect, leveled the playing field for smaller traders making it easier for them to make a living trading without fronting tons of cash all at once. In an unpredictable market like we are seeing now, the small and steady return is going to be much more beneficial to you.

Categories: Starting Out
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