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Binary Options Traders: Economics and Mathematics

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Trading, options, charts, quotes… it all sounds complicated, doesn’t it? A beginner will quickly think: there’s so much here, and I haven’t studied mathematics, economics, finance, politics… I can barely calculate mortgage interest on a calculator. And what are my chances here?

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I see economic news here and there:

  • inflation;
  • central bank discount rate;
  • industrial production index;
  • Eurobonds

And a whole host of other terms. You read all this and think – is trading for me?

In fact, the whole world of trading can be conditionally divided into 2 types:

  • algorithmic;
  • intuitive.

Reading interviews with successful traders or books about them, we suddenly discover that some have no economic or mathematical education, while others have brilliant mathematical skills.

And these two worlds hardly intersect. Mathematicians in trading work on stock exchanges, in large investment companies and apply the most complex algorithmic theories, such as statistical arbitrage on convertible bonds.

Binary Options Traders: Economics and Mathematics

This world is inaccessible to people from the humanities. However, they do have another tool – their own intelligence and talent. With practice, this same trader’s intuition changes.

Therefore, humanists work with the market manually, listening to themselves and pressing buttons at the right time. Mathematicians, on the other hand, create intelligent and highly intelligent robots that compete with similar robots in search of market vulnerabilities. These are completely different planets, their orbits barely intersecting.

A good quote from a trader:

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There are a lot of intelligent people working in this sector. They are educated, cultured, understand finance, believe they can make analytical forecasts, have experience in trading and some even teach other people how to trade on the stock exchange. But most of them fail to do the most important thing – make money on the stock market.

That’s interesting. There are plenty of economists in the market – but the money is usually made by people completely outside the market, it seems.

Is there any chance of success in trading for the average person?

Of course they do. A humanities person doesn’t work with the market, but with themselves. With a reflection of the market in their mind. For an algorithmic trader, this reflection is the mathematical model embedded in the trading robot. The humanist, on the other hand, serves as such a mirror for their own inner world, their personal perception of market realities and their interpretation.

As a result, the success of an intuitive trader is not mathematics, but the ability to control their own emotions, infinite patience and extensive practice.

We’re not the first to face the need to correctly predict the price of an asset, are we? People have been doing it for hundreds of years. They’ve predicted everything from share prices to the cost of goods and services. And for this, appropriate tools were invented a long time ago:

  • fundamental analysis – the study of economic news;
  • technical analysis – Dow theory, trends, support and resistance, candlestick analysis and price action;
  • volumetric analysis – study of order flow;
  • indicators – mathematical formulas for market analysis.

And look – you don’t need to be a professor of quantum science to master these tools. There are many examples in the markets of 18-22 year olds who have made their first million dollars. The money is usually made on banal trend lines – and connecting two peak price tops isn’t that difficult.

Binary Options Traders: Economics and Mathematics

It’s important to have a lot of patience to work with hundreds of conditions for these lines, “pumping” your intuition, not your ability to draw them, which a 5-year-old can also do.

What is the average age of successful traders?

Since you don’t need to be a 60-year-old economics professor to work in trading, is it possible to be successful as an 18-year-old? People who aren’t connected with trading will tell you that it’s impossible and? they’ll be completely wrong. Everything is exactly the opposite.

Quote from Mike Bellafiore of One Good Trade:

In the fall of 2008, the US financial system was on the verge of collapse, and a 23-year-old trader I know was making $30,000 a day. The situation of 1998 repeated itself, when young people who had barely come of age – prop traders rejected by the big banks – were making 10 to 25 thousand dollars from the market every day, without charts, news feeds, expert commentary from CNBC, and even without air conditioning systems.

Reading books like Liar’s Poker by Michael Lewis, you’ll be surprised to learn that 22- to 23-year-olds work in investment banks. And they receive several million dollars from investor funds to manage. And they don’t even have economics professors with gray hair. That’s how things work in this industry.

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What’s more, the average age of a trader in an investment bank is up to 25. Older… cheesy doesn’t get hired. Banks only want fresh brains for trading.

Curtis Face for the famous “turtles” experiment received $2 million from Richard Dennis in management when he was… 19 years old. Do you remember what you were like at 19? 😀

Trading legend Nicholas Darvas was a young professional dancer who traded in between his performances. And no, he wasn’t a fan of cosines. His system was based on fundamental technical analysis (he drew these “boxes” on the charts). And there are plenty of examples in this market.

However, does this mean that any guy or girl can do it? No. Very smart guys who pass a tough and competitive selection get into the same investment banks. So you can’t just take a simple indicator and make money from it. Otherwise, your dog can make money on the market too.

Trading is very simple (yes, how)

When I saw the stochastic, I thought, man, what could be simpler than that? The indicator is overbought – the price will rise, oversold – the price will fall. It couldn’t be easier. Wow, what a great tool, and it’s free too!

Binary Options Traders: Economics and Mathematics

However, while working with it and gaining experience in trading, I learned that this signal cannot be interpreted unequivocally. It has many options for when it works and when it doesn’t. Stochastic leads you to a loss in record time if you blindly enter overbought/oversold.

As a result, it took me over a year and about two thousand screenshots to learn how to integrate stochastic into my trading system.

Then you get to technical analysis, candlestick analysis, continuously studying price movements, learning hundreds of various factors. And you study, study every day.

Over time, you realize that any system, no matter how complex, in inexperienced hands always leads to losses. So without the basics of economics and technical/fundamental analysis, there’s simply nothing to do here.

The Trader’s Trap

I fell into this trap again and again. Not understanding the price, I started to complicate things. I added more and more complex systems and indicators, and you know what? It was bad thinking. In fact, by complicating analysis, you make things worse.

You need exactly the opposite – simple tools that you perfect. How many times have I analyzed graphs, studied economic news and come to the same conclusion – the basics are more important. Complicating things doesn’t make them better.

Binary Options Traders: Economics and Mathematics

You should understand that binary options, like Forex or stock markets, are far from being an easy way to make money online. But why make it more complicated? This is not a mathematical theorem. First of all, it’s difficult psychologically, not technically.

Yes, at first everything will seem incredibly complicated and your head will be a mess for a while. However, after going through this school, having studied the basics of technical / fundamental analysis, having dealt with the main concepts of economics, with practical trading methods (such as price action) – you will get better and better, and many things will seem elementary to you.

Should a trader be an economist?

Over time, you’ll realize that trading is no more difficult than any other job. Any expert, a professional in their field, is involved in something that can be compared to trading. He analyzes, studies, draws practical conclusions, learns from his mistakes – that’s trading too.

That’s why in binary options or Forex you shouldn’t try to understand the whole economy directly – it’s pointless. Leave that to Nobel laureates and other lecturers. For decades, everyone has tried, but no one has predicted a single elementary economic crisis. For everyone, the crisis is always a surprise. The snow fell in winter – wow, what a surprise.

When you listen to an economist’s speech, it’s like, ‘Oh my God – I’ll never understand it all! Yes, and you don’t even have to. Economists don’t earn anything on Forex or the stock markets.

Look at the results of the Robbins World Cup – there are no economists. All the prizes are occupied only by practicing traders.

As a result, many professional traders who have already earned their first million dollars (and this is a small amount for trading) still don’t understand what the financiers are saying on the screen. It’s true. They have completely different tasks. Economists are on the payroll, office plankton with ambitions. Their small talk has gotten them nothing but a hole in the wallet. That’s why you’ll hardly find economists and accountants among professional traders.

Experts are never financially responsible for their own forecasts.

A trader risks his money every day. And he always bears full responsibility for his forecast – working with personal and sometimes other people’s funds, which investors have entrusted to him. These are completely different categories of citizens: a practicing trader and a theoretical economist.

Democratic Trading

Trading is one of the most democratic areas of activity. Even on this site there are such examples. The guy is 17, and in binary earned about 10,000 reais, took some money from his father and bought a Honda. At 17. In binary. Where else can you earn that much, especially at his age? McDonald’s? You can also distribute advertising in the subway.

However, very few people here achieve anything like that. It’s a fact. There are few successful guys. And if you follow the signals offered on the Internet or hope that the magic indicator will suddenly predict the market, you’re in for a big disappointment.

Success here is achieved by people who have mastered the basics very well, put in thousands of hours of practice and created their own effective trading system. And age is not an obstacle at all. Warren Buffett bought his first share at the age of 11. The earlier you start, the better, just like any other business.

Remember, it doesn’t have to be complicated. If you put 10 indicators on the chart, you won’t get any better. You need to do some technical analysis, understand the news a bit, add 1-2 indicators if you wish, which will sometimes help you, and that will start you on the road to trading.

Well, what it will be – you’ll see for yourself. We have a whole drama of victories and defeats in our diaries on the forum. Trading is life and it won’t be boring.

That’s why this market is good – everyone has a chance. We need to fight for it, resolutely, realizing that age has no role here. Otherwise, you only get one chance at probability theory, and with it “success” will be the same as in the lottery.

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Until 2016, I worked as a cook in a small restaurant. I know very well how challenging it is to stand all day and receive a salary that barely covers the needs of a family. I ventured into trading with the goal of earning extra income by trading during my free time. Like most people, I had a difficult start, but fortunately, with a lot of dedication, I reached a point where I could resign from my main job and fully dedicate myself to binary options (with much improved quality of life).

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