Auto Binary Signals – A Revolutionary Trading Method

Binary options have always been hailed as an easy path for beginners into the world of trading and profits. While a simple Put/Call binary option equation is indeed simple enough, and while it’s wholly transparent as well, its strategy implications are almost infinitely convoluted. Because of the payout rates (which are in the 70-89% range), one has to win far more than half of his/her trades just to break even. What this means is that in order to be successful with binary options, one needs to find a consistent way to come out ahead. This can be accomplished through proper technical analysis, to which the fundamentals have to be added as well. Such a task obviously exceeds the abilities and means of most rookie traders.

For such traders, a proper signal service is the answer. Letting others do the bulk of the “dirty work” is the only viable path. The problem is that like the greater binary options world, the industry that has sprung up around trading signals has given birth to quite a few scams as well. What one really needs is a legitimate service, like Auto Binary Signals.

Auto Binary Signals is a truly revolutionary trading method

Compared to all other signal providers out there, Auto Binary Signals is a head and a shoulder above the rest.

Binary trading signals come in a number of different forms these days, or rather, from a number of different sources. There are good and bad signal providers. All auto trading scams are based on trading signal generation, and indeed, most auto traders do in fact carry a manual trading option too. This option is essentially a signals service, based on signals generated by the software. These are obviously bad signals. Then there are the expert alerts: these supposedly originate from flesh-and-blood traders, who are successful at what they do and who are willing to share “pointers”.

Then, we have Auto Binary Signals, which is in a class of its own.

What makes Auto Binary Signals special?

Auto Binary Signals is NOT an auto trader. It does not act upon its own signals, rather, it leaves the final decision to the trader. Also, the way it comes up with its signals is wholly transparent and easy to understand, even for beginners. What’s more, Auto Binary Signals calculates the probability of success of every one of the signals it generates and it ranks its signals based on this. To make everything even handier, it also color-codes its recommendations. This way, traders can clearly see what they’re trading, when and for how much, and they know their chances of success before they actually open the position. It is recommended that one stick to trades with a better than 85% rating.

Auto Binary Signals makes sure its users do in fact see the trading signals it generates. Every time the system spits out a signal, a window pops up and a sound alert goes off. The service works just as well on mobile phones, tablets and other mobile devices.

Why You Should Be Careful With Too Small Stop-Loss

In the past, I met several traders, that experienced live results completely different from their backtest results. The cause was a seeming triviality – too small stop-loss. Let me explain to you today, why this can be a problem, what to be aware of and how to avoid this danger. The following topic is just about those breakout strategies that are using STOP order to open a position and, at the same time, they are using too small stop-loss (this article is not about strategies using market order). What is too small stop-loss? Well, it depends on the market and the timeframe. But in general, it is a stop-loss smaller than the size of an average bar of our main timeframe. Let me give you an example – if we are using a 30-minute chart with an average bar value 250 USD, and our strategy is working with an 80 USD stop-loss, we are heading into a serious trouble. The live trading results might (and in most cases almost probably will) be totally different from those that we have from the backtest. Let’s take a look at the reason why.

This problem occurs when the stop-loss is so small, that some of the trades have entry order and stop-loss on the same bar. Let’s say we have an entry STOP order on the price 100 and also a stop-loss on the price 99. Now, imagine that the bar opens on 98.7, it goes to 100.1 and we open the long position – and the stop-loss is set up to 99. And all of this happens within the same bar – i.e. within this one bar, the entry order is activated, the position is opened and the stop-loss is set up.

Now it is important to understand why this can be potentially a dangerous problem. It is quite simple. There are several backtesting platforms which are not able to recognize, with the wrong setup or when the data resolution is not fine enough if the stop-loss was or wasn’t hit on an entry bar. In other words, there are certain situations when, in reality, the stop-loss was hit right after the position was opened, because right after the activation of the entry order, the market starts heading south. However, our backtesting platform evaluates the trade as a profitable one (from now on I will write about TradeStation as it is a platform that I primarily use). How is it possible?

Let’s continue with the demonstration of the situation described above. In this situation we can see the rising bar, i.e. the one that has a close price above open price and, at the same time, the close is close to its high.There is an assumption that the bar was raising the whole time and TradeStation assumes that the “inner” move of the bar, i.e. the way the bar was generated, was constantly rising, a straight line.

TradeStation is simply following the logic that when the bar closed close to its high, the process of generating this bar was rising. In such situation, TradeStation assumes that the bar opened on 98.7 and the price was continuously rising to 100.4. And during this time, it also activated our buy order on the price 100.

Nevertheless, this is very inaccurate and dangerous assumption. What if the bar was first rising, activated our purchase order, but then it reversed and went back down, below our stop-loss, and then started rising again to close to its high?

This is a totally realistic scenario that is happening every single day and that would result in a clear loss (right after we open the position) – and yet, TradeStation (and potentially also other software), defines the situation as if there wasn’t any correction inside the bar at all. So no stop-loss was hit and trade ended up as a profitable one. This is the root cause to major problems as in the backtest you clearly see a lot of profitable trades that, in reality, would end up as losses – and right after we start trading this strategy live, everything starts falling apart…

Protection #1

Luckily the situation isn’t so serious as it looks like and the backtesting platforms, in general, take this risk into consideration.

The first protection against this threat is simple and, to a certain level, highly efficient. TradeStation calls it LIBB (Look-Inside-Bar-Backtesting), others call it different names, like Bar Magnifier. The point is that when you turn on this feature, the program looks inside the bar to the level of the finest available data resolution (in most cases it is 1 minute), if there wasn’t any inside correction after the entry order was activated, or if there was a correction on the same bar when we entered and the stop-loss was hit.

Despite that it sounds like a great solution (which is today a standard part of most platforms), it doesn’t have to be sufficient when it comes to small stop-losses. Why? Imagine a situation when your stop-loss is 80 USD, but the average bar of your finest LIBB resolution (i.e. mostly 1 minute) is 150 USD big. In this case you are experiencing the same problem as described above, when the platform is not able to determine whether the stop-loss inside the bar was hit or not and it makes, again, just an inaccurate approximations that are driven by the above-described logic – if the bar closed closer to its low or closer to its high. In other words, you are again at the beginning and with too small stop-loss, not even LIBB will help you, and the problem still persists.

Protection #2

So, we are getting to the point when we need to go a little bit deeper to solve this problem.One of the solutions would be to use even finer data resolution – down to the tick level. But this isn’t as easy as it sounds. Firstly the tick data history is not so easily accessible, or just for a very short period. And if these data are available, they are really expensive. But even if you still purchase tick data, you need to solve several technical issues – as the tick data are usually so big, that most of the platforms won’t handle so many data, crashes or runs backtests incredibly slow (I can confirm this).

Protection #3

So we need to use much simpler solution – and that is the necessity to use reasonably big stop-loss. And what is reasonably big stop-loss? Simply use stop-loss that is at least 1.5-2x bigger than the biggest 1-minute bar on your chart. It is simple and you can avoid several problems. For example, if the biggest 1-minute bar for all your data history was 300 USD, use stop-loss at least 450 USD. Period.It is simpler and safer to get used to higher stop-losses than lying to ourselves and subsequently be surprised why such a nice backtest equity is quite the opposite of results of live trading.

13 Futures Markets For Automated Breakout Strategies

One of the frequent questions I keep receiving is what is the complex list of markets that are suitable for automated trading strategies. Let me give you a short overview of 13 markets that I know that you can develop interesting automated trading strategies for.

US Index markets: TF, EMD, YM, ES

American index markets are my specialization and I can confirm that for all, above mentioned markets it is not so difficult to find functional and high-quality automated trading system. I think that the most simple market where you can get good results quickly is EMD. Most of the strategies working in EMD market are (with minor changes) profitable also on TF market.

On YM market, you can get strategies with small stop-loss and it definitely is a market suitable for small trading accounts. ES market can be rather challenging. Due to a high level of saturation of automated trading systems in this market, it takes quite a while to find an interesting and robust system. Still, it is not impossible, and, as a reward for your hard work, you can expect smaller stop-losses, which is making this market more suitable for small accounts.

EU Index markets: FDAX

I have quite a lot of experience with this European market. Its high volatility can bring some really nice profits, but if you are not careful enough, you can experience rather big drawdowns. In fact, it is not so difficult to create a system for FDAX market, when using time template with US trading hours (15.30-22.00). Using this time template, I have managed to create several breakout systems that can be profitably traded in this market. One of the systems I have created for FDAX market several years ago, is quite simple breakout model (my breakout models are, in general, not complicated) and it turned out that it is profitable also in US index markets and several other markets as well. Systems don’t have to be complicated to be robust, it is just necessary to be patient – as it takes some time to find simple systems that are robust.

US Bonds: US

I have never traded any of my automated trading strategies live in this market ( I specialize myself in US index markets), but creating an interesting, simple and robust automated breakout strategy can be done even in this market. I know several traders who are successfully trading US market and there is no reason to avoid it. The only challenge is to create a system with big enough avg. trade value. 1 tick in this market represents more than 30 USD, so transaction costs and slippage can have a big impact in the live equity curve. So keep that in mind.

Energies: CL, RB, NG

I have quite a lot of experience with energies as well, especially with trading CL and NG markets. To trade these markets you need a bigger trading account, they tend to be quite volatile time to time, but creating an automated breakout strategy is not so difficult. The “secret trick” here is to experiment little bit with time templates – as they can have really big impact on the final results. So again – you need to be patient little bit and don’t be afraid of experimenting.

In general, I have also quite interesting results in the RB market, but the downside of this market is really low liquidity, which is the reason why I haven’t started live trading with any of my systems.Some of my students are also experimenting with energy markets and according to some systems that I have seen, I can tell that I am not the only one who can create really robust automated breakout strategies for CL and NG markets.

Grains: Wheat, Corn

These markets can be little bit challenging for creating breakout systems and I personally have had just a partial luck when developing systems for these markets. I have managed to find a couple of models, but it requires already advanced know-how. And I have seen several successful systems for these market from my students as well.

Personally, when it comes to grain markets, I am little worried about one issue – they tend to get little bit “crazy” time to time and there can be a limit move. So, when working with these markets, the approach needs to be more sophisticated and I highly recommend to have an advanced system for risk management, that will, for example, quickly decrease the number of contracts (or turns the system of completely), as soon as the volatility increases rapidly. Luckily, the limit moves are often preceded by volatility increase, so you can predict it and react in advance. Besides this specificity, grain markets have quite an interesting potential for automated breakout strategies.

Softs: Cotton, Sugar

I must admit that I don’t have much experience with these markets. But I know that several of my students, that are using advanced know-how, were able to build interesting and robust breakout strategies even in these markets.

I was experimenting with sugar market in the beginning of my automated trading career and I think that this market gets really interesting when you decide for position trading. Position traders have, in this market, much more possibilities how to get an interesting breakout automated strategy.

In general, it is always easier to search for long trading strategies rather than short trading ones. I myself build strategies trading long and short in separate ways.