If you are wondering how some people make money with binary options on weekends, then this article is for you. OTC quotes for binary options differ from regular exchange-traded assets in that they are traded on weekends when all other markets are closed. An exception may be binary options for cryptocurrencies , since the cryptocurrency market itself operates seven days a week.
Despite the fact that OTC quotes have their advantages, unfortunately, they also have disadvantages, and further, consider in detail both the positive and negative sides of OTC quotes.
Content:
- What are OTC quotes;
- Where do OTC quotes come from?
- Why do binary options brokers offer OTC quote trading;
- What assets can be traded using OTC quotes;
- Binary options brokers with OTC quotes;
- Pros and cons of trading binary options on weekends;
- Should I trade using OTC quotes?
- Reviews about OTC trading;
- Conclusion.
What are OTC quotes
OTC (Over The Counter) is translated from English as an over-the-counter transaction. The essence of over-the-counter transactions (OTC quotes) is that they, unfortunately, have nothing to do with real prices and do not reflect what happens in the real market from Monday to Friday.
All markets except cryptocurrency exchanges, be it Forex, stock exchange or futures market, operate from Monday to Friday, and close on Saturday and Sunday. The stock exchange (share market), in addition to weekends, also opens at 16:30 Moscow time, and therefore you can see that these assets are in place with a regular Forex broker :
Whereas for binary options brokers that provide OTC trading, these markets are active all the time:
The closure of markets occurs because on weekends all organizations responsible for exchanging currencies (banks, large financial institutions) or selling and buying shares (stock exchanges) are closed. An example is foreign currency exchange offices, which often set prices on weekends that are much worse than the market prices on weekdays. After the weekend, “gaps” often appear on Monday, and the owners of exchange offices want these force majeure circumstances (if they occur) to be compensated by setting their own prices that guarantee profits.
Accordingly, when a broker allows you to trade OTC quotes for binary options, he sets his own prices, which are not related to the exchange ones. And it doesn’t matter what asset it is or what market it is. All trading using OTC quotes for any trading assets is carried out exclusively at prices generated by the broker. And no news, fundamental facts or supply/demand at such moments affect the price, since OTC quotes are synthetic prices. And despite this, visually they look exactly the same as stock exchange ones:
There are several different ways to create OTC quotes, but which binary options brokers use is of course not known. And it is not surprising that the algorithm is not known, otherwise every trader would be able to predict the weekend price movements for OTC quotes.
Where do OTC quotes come from?
There are two known ways to create OTC quotes, which are used by binary options brokers. Both of these methods are completely different in terms of the algorithm for creating quotes, which is why the second option is much more difficult to make a profit.
- Creating a revised copy . So, the first method that brokers use is to create OTC quotes based on real exchange prices. The broker takes the prices of the desired trading asset for the previous trading day, after which special software converts them into a new chart, which is used on weekends as OTC quotes. The advantage of this method is that the created quotes, although altered, are formed on the basis of real prices, which is why you can predict their future movement through analysis.
- Creation of synthetic prices. This method is the easiest for the broker, since to create such OTC quotes, a special algorithm is used that creates quotes randomly without taking into account any factors. The prices created in this way cannot be analyzed, so trading binary options turns into guessing the market movement. But the main danger is that the broker can “draw” any prices at any time, and since these are OTC quotes, it will be impossible to prove anything.
- Quotation based on supply/demand. This method is unlikely to be used by any binary options brokers, since it is the most inconvenient, and most importantly, it brings much less profit to the broker. Its essence lies in the fact that traders trade options among themselves at times when the markets are closed. This creates prices based on the supply/demand of a particular broker. But in this case, it is necessary for a huge number of traders to trade at the same moment (which is impossible), since someone wants to buy a Call option for $100, and someone only for $1. Because of this, the price chart would also look unsuitable for analysis and trading. And, in addition to this, the broker’s earnings will be only part of the transaction as a commission, whereas in normal times the broker receives the entire amount of the trader if he made an incorrect forecast.
It is important to note that if you hear from any broker that his OTC quotes are formed in a third way (due to supply/demand), then in 99% of cases this will be deception and misleading, since there are no disadvantages for the binary options broker himself There are many more advantages to this method of providing quotes than advantages.
Why do binary options brokers offer OTC quote trading?
The trading base of large binary options brokers can number thousands or tens of thousands of people. And most of these traders bring the main profit to the broker. Therefore, in order not to lose these profits, and also to meet the demand of clients for trading every day, brokers provide OTC quotes for binary options trading.
Despite the fact that these quotes are synthetic, they still attract a lot of people who buy binary options on weekends, and also when the markets are simply closed.
What assets can be traded using OTC quotes?
Typically, on weekends all the same instruments are available for trading as on weekdays. Therefore, these could be the following tools:
- currency pairs;
- shares of American, European or Russian companies;
- commodities (oil, gold, gas);
- indexes;
- cryptocurrencies (always traded regardless of holidays and weekends).
It is worth considering that market volatility over the weekend can change and become many times higher. Currency pairs are the most volatile instruments. We do not take cryptocurrencies into account, since they work every day, seven days a week.
Therefore, it is worth considering that since the binary options broker itself sets prices on weekends, it will be difficult to predict their movements, which means the risk of making a loss increases. To always successfully predict price movements on weekends, you need to know the algorithm that the broker uses to calculate prices, but of course it is almost impossible to find out, especially since it is periodically subject to changes. Therefore, when trading on weekends, traders often rely on luck rather than analysis.
And yet, even though the algorithms for creating such quotes are not known, it is still worth sticking not just to fortune telling, but to such types of analysis as:
There is no point in including fundamental analysis here, since such quotes, as mentioned earlier, are not affected by any news.
If you look at the OTC quotes, you will see that they are as close as possible to the real ones:
This means that the trend rules work for them. And trend trading will be even more useful when trading binary options on such quotes, which means it is important to understand how it works:
- trend in the markets ;
- identifying and using bullish and bearish trends ;
- market phases ;
- flat on the market .
Binary options brokers with OTC quotes
At the moment, many brokers provide binary options trading at OTC quotes. Let's look at the most popular of them.
The Pocket Option broker provides weekend trading on a variety of trading assets, which include:
- currency pairs ;
- stock;
- indexes;
- commodities.
If currency pairs are traded 24/7 five days a week, then the Pocket Option broker provides OTC quotes for these assets on weekends, while quotes for stocks, commodities or indices that may be closed on weekdays, but can still be traded every day.
All these quotes from the PocketOption broker are marked with the postscript “OTC”:
The Quotex broker also allows you to trade currency pairs, commodities and indices on weekends, and on weekdays, when some markets are closed, you can also trade, and, in fact, it turns out that the Quotex broker allows you to trade every day 24/7 even on holidays.
All OTC quotes from the binary options broker Quotex are also marked with “OTC”:
It is also worth mentioning the Deriv broker, which allows you to trade at any time and on any day of the week, but not with OTC quotes, but with its own synthetic indices, which have 26 different trading assets. And this:
- volatility indices;
- growth or decline indices;
- bull or bear indices;
- indices of rapid increase or decrease;
- step indexes.
Pros and cons of trading binary options on weekends
Trading binary options using OTC quotes has both a number of advantages and a number of disadvantages. Let's look at the main pros and cons of trading binary options on weekends.
So, the pros:
- the ability to trade on any day and at any time, seven days a week, which may be especially suitable for those who are busy on weekdays and do not have the opportunity to be near the terminal;
- interest on payments on weekends can increase up to 100%;
- OTC quotes are not affected by news and other fundamental factors;
- additional training for those who are still mastering trading and trading using a demo account .
Minuses:
- increased risk, since prices are set not by the market, but by the broker;
- quotes may change depending on the wishes of the broker;
- increased complexity of analysis due to over-the-counter prices;
- Some types of binary options may not be available at OTC quotes.
But don’t think that it’s impossible to make money on weekends. Large and trusted brokers do not make strong changes to prices, and if you approach binary options trading wisely, then most likely you will be able to make money on weekends.
Should I trade using OTC quotes?
Despite the fact that trading on OTC quotes has quite a few advantages, trading on them is more risky, since prices are not determined by supply and demand, but by a random distribution of prices. And your time on the weekend can be spent more usefully by trading, for example, on paper, taking training in binary options trading , reading a book on trading , or taking a break from the market altogether.
Beginners should trade on weekends only on a demo account, as this will allow them to practice trading technically. Traders without experience should definitely not trade on weekends, as this will be a simple game of roulette.
Speaking of trading on paper, you can use, for example, a live chart for binary options , on which you can scroll back through history and make trades on paper, writing down which option you bought and what the outcome of the trade would be.
In any case, if you delve into the essence of the formation of prices for trading assets and understand how the market works, you are unlikely to want to trade OTC quotes, since the risks increase significantly, but the profit remains unchanged.
Reviews about OTC trading
There are quite a few traders who have tried trading these quotes, and their opinions are divided. Some say that OTC quotes are no different and all you need to make a profit is to know how to trade. Other traders, on the contrary, speak negatively about weekend trading, calling such quotes a scam and a casino game.
There were also those traders who tested the same trading strategies and indicators that showed profits on weekdays, but brought more losses on weekends. And, paradoxically, there are those who said the same thing, but in reverse.
The most important negative feedback about such quotes was that many lost their deposits by trading on weekends, although trading on weekdays brought them profit.
Conclusion
Trading binary options on weekends is no different technically from the standard work week. You can buy Call and Put options, use signals if the broker provides them, carry out analysis using indicators for binary options and various technical tools. And if you have doubts, then you always have the opportunity to test this type of trading on a demo account. The main thing is to follow the rules of money management and risk management , and keep emotions under control.
See also:
Rating of binary options brokers
How to correctly determine the trend in the binary options market
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