December 11, 2012

Beat the Binaries Review

So, I have been testing a beta copy of a new system, Beat the Binaries from Neil Leitch. I’ll start by talking about what you get and then go onto my test results and thoughts.

The beat the binaries manual is provided in a protected file, like a pdf.  It is a bit of a faff because of the protection, but I can understand the reasons, given all the piracy for these types of system manuals/ebooks.  There is also an associated website and members area where you can download the additional files that are required.  Support is also provided by Neil via email, and I must say that Neil has always been very responsive and helpful when I contacted him.

Ok, so first the manual. The manual is very complete.  It is written for the absolute newbie, who has no knowledge about anything to do with trading, financial markets, binaries, etc, etc.  This means, it is really great for beginners as it provides all the information you will need to get going.  There is a slight downside to this however; the manual tries to uses lay terms that a complete novice might more easily understand, such as “red candles” or “green candles”.  That’s great for the novices, but as an experienced user I actually found it a little confusing. I also didn’t know what to skip and what to read, so I found it a little difficult to work my way through all the basic information to get to the important parts.  I did provide this feedback to Neil and he said he would adjust the manual to take the feedback into consideration.

There are two strategies, one based on a 5 minute chart and one based on a 60 minute chart. The triggers for both strategies are completely mechanical, so it is possible to lookback historically and determine how many trades would have been successful.  I spent some time to do this analysis and determined that both strategies had between a 45% and 60% strike rate.  That’s a pretty good strike rate, so looking promising.

The strategy uses an MT4 demo account in order to determine when to enter a trade, and then the binary trades are placed using a broker.  You can use any broker who provides binaries, however their advised broker allows paper trading, and also allows very small amounts to be staked. So, you can try this without risking any funds and then move live with small amounts when you are ready.

For both strategies you need to monitor the MT4 chart(s) and then when the appropriate situation occurs, switch to the broker and place the trade. So, you have to ask yourself, are you available to monitor the charts and then place the trades.  For the 5 minute strategy, that means you really can’t do anything else as the chart can move pretty quickly. You certainly can’t go to work and keep trading. Trading from a mobile device is also not really possible as it would be very awkward and you would probably miss the trades. However you could perhaps choose to do this for an hour before work, or maybe an hour or two when you get home. You might not get any trades during that hour or you might get several. The 1H strategy is a little more forgiving time wise, since you only need to check the chart on the hour.

I will say first off that it is fairly time consuming.  The 5M strategy in particular, but even the 1H strategy requires you to check your charts on the hour, every hour, to see if a trade needs to be placed.  In the early stages I missed quite a few trades simply because I was unable to, or just forgot, to check my charts.  To solve this, I wrote myself an alert indicator for MT4 that would alert me (and send an email) when the trigger occurred.  I did suggest to Neil that this type of alert is almost essential, otherwise many trades will be missed.  Again, Neil took on this feedback and said it might be something he would look into.

So, onto the trading results.  When you place a binary trade with the broker you get normal odds for the binary trade (the odds are constantly moving, as the price changes).  Neil states in the manual that you only take a trade when the odds are 2.0 or greater.  This is equal to a 1:1 risk/reward ratio.

The 5M strategy I personally didn’t like as it simply required too much time monitoring the charts. However, I can confirm that it was profitable returning 6% in just a few hours (spread out over a few days) trading. Overall I had a a strike rate of just under 55% with this strategy.

The 1H strategy was also profitable.  Over a 6 week period, trading the 1H strategy with FTSE, GBPUSD and EURUSD I took 36 trades, of which 18 were winners – so exactly 50% strike rate.  My account started at £400 and although Neil recomended risking 5% per trade, I didn’t feel comfortable with that, so I risked 2% of the account on each trade. The account (from trading just the 1H strategy) currently stands at £458.96, so almost 15% profit.  Pretty good!

It is worth saying a few things about the system(s).  They are entirely mechanical, and you have to trust them and simply work on the fact that the statistics prove over a long period of time that you will be profitable. I started with 4 straight wins, which took my account to £432 (8%), and then my account just yo-yo’d and did nothing over the next 4 weeks.  This was because I was achieving a 50% strike rate, but with only 1:1 risk/reward.  Either the strike rate needed to increase, or my r/r ratio needed to change.

And then something happened on one trade.  I noticed that had I waited about 10 minutes, instead of taking the trade straight away, the odds had increased dramatically in my favour.  This was because price moved against me slightly and because of the way that the binaries are priced, it meant the odds increased. This is mentioned in the manual, but it encourages you to take the trade with odds of 2. So, towards the end of my testing, I stopped taking all the trades and instead started waiting until the odds reached at least 3. This is a 1:2 risk to reward ratio and would mean that the system becomes considerably more profitable.  Earlier today, I just had a profitable trade with odds of 5.0.  That is a risk to reward ratio of 1:4!! which is a pretty amazing result.  The probability of the trade being successful remains completely unchanged at around 50%, but I now had a significantly better profits on my winning trades. Of course this might mean that I miss some trades if the odds do not get to at least 3, but I am happy to miss those trades because the ones I do take have a much better r/r ratio.

So, to summarise, I have to say that I think the alert indicator was useful and I would have missed many trades without it. However, both strategies are statistically sound and should be profitable in the long term. It is also worth saying that this was only a beta copy of the system. I have since spoken with Neil and he said in the full release version he has tweaked some of the rules and that it now has a better strike rate.  I’ll be following this up with another review next year with my latest updated copy of the strategy now in hand to see if it has indeed improved.  But for now, Beat the Binaries still definitely gets stamped with APPROVED.

You can get Beat The Binaries here:

http://www.cash-master.com/BeatTheBinaries.php

Filed under Binaries & Options,Forex,FTSE 100,Spread Betting by Jason

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