Is it Ever a Good Idea to Trade OTC Binary Options?

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There’s a lot to say about OTC markets and binary options. Let’s talk about it. Welcome to the channel. My name is Jason. Let’s get going.

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We got another great question from someone and I’m going to just put that up here on the screen. Daniel asks, he writes, hello, I’ve been doing binary for a few years now,

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but struggling a bit. I understand support, resistance, trend lines, reversal, and some other basic concepts. I believe I can mark up a chart pretty decent. Right now I’m focusing on OTC since sometimes my work schedule won’t let me trade during the day or when the pair’s payout is decent. Do you have an OTC strategy? Thank you. Yeah, let’s talk about that for a moment. Before I go into the OTC, I’m going to tell you, I’m going to show you some things with OTC. Talk about that. But I want to tell, say something to this first part here. It says, I understand support, resistance, trend lines, reversal, and some other basic concepts. And I believe I can mark up a chart pretty decent. I know that. And what’s funny is that Daniel and other people who are watching this, you’re probably very much like what I was for many years and you get very very smart at technical analysis and somehow you can’t take that smartness and turn it into money and that is really what’s frustrating because like I know how to do this but I can’t seem to make money with it what the freaking heck how do I do that and I remember I remember when I I walked into an interview with a company in London to start trading there. And I’ll never forget, I told the guy, I was like, yeah, honestly, I really get it. I understand technical analysis and I can do really great things with it. My analysis is really pretty amazing, but I do have a hard time turning that into money, making a profit. And then he said this, and I didn’t like it at first it kind of hurt me at first but it was some of the best things I heard is in 2012 I believe it was and he said Jason that’s because you think that knowledge equals dollars and it doesn’t and it sounds like it makes sense on the surface but I didn’t realize how deep that was and oftentimes you and I we’re trying to like gain more knowledge gain more knowledge gain more knowledge and somehow that’s going to turn us into profit, turn us into being profitable. But it’s not. Like I know people who know nothing about trading. Nothing. And they make crazy bank. And then there are plenty of other people, they are so smart, so clever, so intelligent, and they just can’t seem to make any money with it. It’s crazy. And so the reason for that is because knowledge does not equal profit. So what I actually did was I took everything that I knew, everything I knew about trading, and I just kind of put it off to the side. And I only focused on that which I knew was going to directly cause me to have profits. And as a whole, I’m going to do some deep dives on all of that stuff over the coming videos. So don’t worry, just keep watching. But that’s crucial for you to really understand that knowledge does not equal money. It just does not. And it doesn’t matter how much you can mark up a chart. It doesn’t matter how much you understand about support and resistance or trend lines or whatever. It’s not going to make any difference. There’s only a couple of things that actually make a difference. We’re going to talk about that. But let’s talk about OTC now for a moment. OTC. Do you have an OTC strategy? No, we don’t. And I’m going to show you why. So I’m going to bring up another screen here. First of all, let’s define what OTC is. OTC stands for over-the-counter. Here we are on Investopedia. And if you don’t know Investopedia, it’s a really, really great website. It’s been around for a very, very long time. time and it brings all kinds of information about the different about all kinds of things regarding investing it’s really really good very fact-based not a whole lot of opinion so what is all we have over the counter OTC is the process of trading securities by a broker-dealer network as opposed to on a centralized exchange like the New York Stock Exchange so generally if you if you go to if you want to buy Apple stock for example, and you get up, you pull up your brokerage account and say I want to buy one share or 20 or 100 shares of Apple stock, you’re going to click that button, money will come out of your account and Apple stock will come into your account. And that goes via an exchange. And that exchange determines the price, that exchange looks at all of the buy orders and the sell orders and everything that’s going on with those where supply and demand is and It adjusts the price then accordingly and it’s based on millions and millions and millions of traders I mean you’ll have like 35 million average daily trades going on with something like Apple or even plenty plenty more Or when you start getting into the indexes or we start getting the forex like it’s crazy the trillions of dollars and the millions of traders who are doing things there and making decisions based on high quality levels. OTC on the other hand is let’s say you and I you and I we want to you know let’s say you’ve got Apple stock and you want to sell it directly to me well if you go through the exchange it’s not necessarily going to come directly to me but you want it to come directly to me. You want to sell that to me. So you and I basically through our broker, not through an exchange, through the broker we make a transaction. I make a purchase. I buy your Apple stock and at that point that price has nothing to do with what the exchange. You might sell it to me at that same price that the exchange is selling it for, but there is no there’s no guarantee that it’s going to be that. There is no there’s no um requirement for it to be the same price as what’s on the exchange because it’s a private transaction that goes through the broker not through the exchange. Okay so that’s what that’s what that is and an OTC stocks and all that they become a bit more popular But they have a very different way of acting for obvious reasons So let’s look here at this next page here on on On Investopedia pros and cons of OTC So yeah, OTC, generally not known for their large volume of trades. Lower share volume means they are not, they may not be a ready buyer when it comes to trade shares. So, if you’re not, you know, if it only has a low amount of volume, you can’t get out of that necessarily. There’s no guarantee, like if the price just begins to drop everywhere and you want to get out of something, but there’s no volume there, you can’t get out of a stock. Okay, so that low volume is very important Also the spread between the bid price and the asking price is usually larger as these stocks may make volatile moves on any market or economic data OTC marketplace is an alternative for small companies or those who do not want to list or cannot list on these standard exchanges Listing on a standard exchange is expensive and time-consuming. Okay Alright, and then so then we can even look here. Yeah. Is OTC market safe? The OTC market is generally considered risky with lenient reporting requirements and lower transparency associated with these securities. Many stocks that trade OTC have a lower share price and may be highly volatile. You know and and and so what you what you begin to see here, now I recognize I’m talking about stocks here, I’m not talking about binaries, but the concept’s very important to understand here first, so that when I do start talking about binaries, there’s some context there, all right? So notice here, it’s saying very clearly, OTC is more risky. And it just is. On a factual level, on a pure objective level, OTC is more risky. There are fewer traders, the price is not linked to any kind of exchange, it is objectively less predictable. Now, let’s start transitioning over to binary options, and let’s look at the OTC market on any binary option platform regardless what it is on any binary option platform you are going to be paid more money if you win an OTC trade. Why is that? Why are you going to be in to take on more risk they have to be paid better. So you’re entering into a more risky product so you have to take on more profit otherwise it makes zero zero sense. Now the next thing with Binaries you have to realize is of all other styles of trading there are in the world, there is nothing more risky than binary options. That is the riskiest form of trading. It is the wild, wild west. It is the United States in the early 1800s when people were moving toward the west and trying to go out and create new land, and even the mid-1800s, the late 1800s, and exploring new lands and saying, this is what I want, this is what I want you got all of these fights going on and you just you know it is the wild wild west there are no rules and you know kind of and so that’s what binary options is it isn’t it is it is the most risky form now you start getting OTC and guess what that adds more risk to it hmm and as a trader believe it or not, as a trader, your job, like your goal is to make money, but your job is to reduce risk. Your goal is to make money, but your job is to reduce risk. I’m gonna do some deep dives into what I just said there. Don’t worry, we’re gonna come up with some other really great videos that’s gonna talk about just that. But the point here is, you’re taking on more risk. And that’s the number one thing you have to keep in mind. Why are you taking them on more risk? Because every bit of data that you see in OTC is 100% pure internal data. It is not linked to an exchange. And therefore the only data when you are trading OTC, the only data you can use is the data that comes from the broker. Now remember here for a moment, when you get into a binary options trade, you are betting against the broker using data that comes from the broker. Anyone seeing something difficult with that situation? Now you might have several wins in a row and it might be really great but think about I’m going to say that statement one more time. When you’re options OTC trade. You are betting against the broker using data that comes from the broker. And what I think is fascinating is that the number of times we get an email from someone saying I think that this broker manipulates their data. Do you know, do you know what I will oftentimes write back asking okay? Are you trading regular? Are you trading OTC? Well, of course, I’m trading OTC. I can make more money. Ah So you are afraid that the broker is manipulating the data when you are betting against the broker using data that the broker provides Really hmm

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Really?

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Hmm. So, my strong recommendation is don’t trade OTC.

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Just don’t.

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Um, and I’m open to OTC. I’m totally fine with OTC if we could know that it’s operating according to the exchange, but we can’t. And it never will. That’s not the design of that tradable instrument. It is perfectly ethical for Pocket Option or Binary.com or BinarySend or any broker out there Quotex any broker out there My mt4 is going crazy here any broker out there to do whatever the broker wants to do is perfectly ethical because it is it is a deal between you and the broker and Whatever price can be offered at any given time. Let’s take a look here. This is actually the blog from Pocket Option. It says, why do some traders avoid OTC? I think that’s really important to pay attention. Despite the obvious facts, some traders have a deep rooted stereotype about the unpredictability of OTC asset price movements. Okay, I just want to know which facts. Show me them. If you look at this article, it doesn’t give any facts in it. And obvious facts about what? Obvious facts that OTC markets are good? I’m not saying they’re bad. Obvious facts that, I mean, obvious facts about what? Obvious facts that OTC markets exist? I mean yeah that’s obvious. I don’t know what these obvious facts are. This article shows nothing on here about, I mean, what is OTC and explains what OTC is and showing, okay, OTC has increased over time. Absolutely. OTC trading and pocket option are a platform implement innovative approach uninterrupted trading any time of the day. General trading assets are available in accordance with the existing asset schedule. Contrarily, OTC assets rest of the time. In cases when for some reason it’s not possible to provide general assets to customers, OTC assets are automatically activated, thus providing a non-stop trading experience. Right. So the facts are you have a non-stop trading experience. What’s that have to do with risk? That has nothing to do with risk. It’s not saying that, I mean, and it explains what OTC is and that OTC even is, you know, is growing over time. But that has nothing to do with risk. So despite the obvious facts, all right, some traders have a deep rooted stereotype about the unpredictability of OTC asset price movement. Okay. This position is also actively broadcast by ignorant traders among beginners in the form of rumors and horror stories. I’ve been doing this for 17 years and traded in banks.

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Don’t know.

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I don’t know that I would call myself an ignorant trader, but I would definitely say I do agree that there are ignorant traders out there who are just doing rumors and horror stories. Absolutely there are. There are totally ignorant traders out there with horror stories about OTC markets. Absolutely. I’m not coming here with any horror story. I’m telling you be aware of what it is that you’re trading and I’m letting you know why we don’t offer an OTC strategy because we want something that is predictable. We want something that millions of people are looking at and basing their decisions on and doing high quality trading accordingly. Not something that maybe a few people are trading against the broker using broker data. The rules of technical analysis and money management are similarly applicable with minor adjustments for the type of asset being traded as well as historical price. Yeah, absolutely. Technical analysis, absolutely. You can totally do technical analysis. But let’s go back to the very first thing that I said. The very first thing that we’re talking about. I understand technical analysis. I can mark up the charts really, really well. But technical analysis doesn’t make profit. So just because you can do technical analysis doesn’t mean you can turn a profit. And that doesn’t automatically mean OTC is bad, but that is not a reason, just because you can do technical analysis with it, isn’t a reason that it makes it worth trading. Money management. Absolutely, money management is hugely important. I am 100% convinced that if you go to our website and you download the impossible to lose trading system that talks to you about our money management system, I’m 100% convinced you’ll never blow your account. I’m 100% convinced of that. That’s not a promise, but I am 100% convinced of that. And so, but money management by itself isn’t going to make you profitable. And that has nothing to do with the risk of OTC trading itself. And then, didn’t I say something really smart here? Really, really smart. It is also necessary to take into account that the price movement does not depend on the movement of the general market price for a given asset. 100% accurate. Accordingly, making forecasts based on the exchange market is irrational. Exactly. It’s completely irrational to make it based on the exchange market. So what are you going to make your decisions based on? Market that’s coming from the broker? Hmm. Sorry, failing to see the the the logic behind that. I’m failing to see a long-term profitable strategy coming out of that that can that can make you money over the long term. Instead you should pay attention to historical data coming from the broker, analyze charts coming from the broker for the location of strong trends patterns, patterns work with power levels and stuff so on coming from the broker when you’re betting against the broker. So my conclusion is don’t trade OTC. Sure you can make more money but is the money, is the more money that you’re making 5% more, 2% more, 6% more, is it worth the risk? I don’t see that. Not if you want to approach trading as a professional. I don’t see the benefit of it. Alright, looking forward to the next professional. I don’t see the benefit of it. Alright, looking forward to the next video with you and have a really great day.