The world markets rest on weekends and public holidays. Banks, stock exchanges, financial companies don’t work, so nowadays there’s practically nowhere to trade.
To solve the problem, brokers provide access to OTC assets – instruments whose quotes are not linked to exchange prices. What is OTC in binary options, why are they necessary and what myths exist about them – below.
What OTC means in binary options
OTC (over-the counter) are assets with virtual quotes. They are therefore available for trading on weekends, when all exchanges are closed. With the OTC prefix, the broker usually allows you to trade currency pairs. Other assets are sometimes available: shares, indices and others.
On weekdays, the broker transmits quotes to the platform from liquidity providers: Leverate, Thomson Reuters and other large financial companies. Each broker forms the prices of OTC assets according to its own methodology. Therefore, quotes for an asset can differ greatly from different brokers by tens of percent and even show a different trend over a period of several weeks to a month.
Why does a broker need OTC options?
OTC in binary options means the difficulty of predicting movement and the inability to use a live chart for advanced analysis. But the demand for weekend trading is high among non-professional traders who can’t devote enough time to trading during the week.
It is possible to make money on the OTC
There is a theory that the concept of OTC in binary options means a guaranteed loss of the balance. If the broker transmits the quotes to the platform, it can manipulate them so that all the trader’s transactions are closed at a loss. This can happen if you work with unreliable platforms. Verified companies provide one price flow for all clients.
However, it is possible to make money with OTC instruments. Sometimes it’s even easier than during the week, because the price moves more smoothly, without big price jumps. But as each platform has its own pricing algorithm, it is more difficult to predict future changes.
Assets with off-market prices are more like games of chance, where the probability of an accurate prediction is 50%. Therefore, it’s best not to trade with large volumes on weekends.
Myths about OTC options
The concept of OTC in binary options trading has been swamped by many myths. But now we will dispel them.
Myth 1: On weekends, one broker is playing against another on purpose: Reliable brokers do not interfere with quotes. However, this cannot happen, as regulated companies constantly report
Myth 2: It is impossible to make money on OTC: It is more difficult to predict the movement, but you can make money. Only if on weekdays the result depends on the trader’s understanding of the market, then on weekends it is worth relying more on luck.
Myth 3: Low performance on weekends: In fact, the opposite is true. On weekdays, the profitability of options depends on market liquidity. At night and during other calm periods, yields can fall below 50%. OTC prices do not depend on liquidity, so the yield is generally stable.
Trade on the weekend or not
Benefits
- Convenient for traders who cannot trade during the week
- OTC charts show almost no bursts of sharp volatility
- These charts are not influenced in any way by fundamental factors.
Disadvantages
- It is impossible to verify the accuracy of citations
- It is impossible to say with absolute certainty that quotes are related to market laws and are not “drawn” in a random order.
- Unscrupulous brokers may use OTC for fraudulent purposes and it will be impossible to prove this to the regulator.
