Using Sentient Trader to trade Binary Options

We are often asked whether Sentient Trader can be used to trade binary options.

Binary options usually have a fixed time span, or a deadline at which time the trade is closed. To trade them successfully you need to accurately forecast to a particular time in the future, usually over a short time period (seconds, minutes or hours).

Sentient Trader analyzes cycles down to a minimum of 3 minutes (using the intraday version of the software), and so it is possible to consider trades over a brief time period. However it is important to understand that the accuracy of the forecast varies because of several factors: 

• Knowing what the cycles are doing can provide a roadmap for where the market is going, but it doesn't always get there in a straight line.
• Cycle wavelengths vary constantly. If you understand this you can trade well, because you know when to expect a turn, and if it comes early or late that doesn't matter because you were ready for it. The problem with trading binary options is that you are working with a fixed time interval ... there is no flexibility in the event that a cycle turns comes early or late.
• Finally as you go shorter and shorter in cycle wavelength the level of random "noise" in the market relative to the influence of the cycles increases. This makes very short term trading more affected by random market moves than the cycles.

With the above considerations you will find that time periods of less than 180 seconds (three minutes) would definitely not be achievable using Sentient Trader. Time periods of about 10 to 180 minutes would be possible, with the reservations mentioned above.

Perhaps the most important consideration is the one of the fixed time period, or the deadline for the trade. If that deadline happens at the expected time of a cycle turn then any variation in cycle wavelength could cause the turn to happen early or late, thereby resulting in a losing trade.

However if the deadline for a trade is expected to occur about half way through the cycle move then you could trade with confidence, knowing that you are not relying on a cycle turn to occur "on time". And so for instance you could make a trade which expires in 15 minutes, if the next 5-hour cycle is only expected to turn in three hours time.