There are a lot of financial instruments that are traded in the markets – however, some are more popular than most. Certain financial vehicles in the derivatives market are favored because they are extremely simple to train. For some, you only need to predict which way the prices will go relative to the time you made your trade.
If you’re right, you profit. If you’re wrong, you lose.
More than that, these financial derivatives expire over a set duration of time. Brokers of this asset offer trades that may last from 30 seconds to a month. On Binomo, the shortest duration a trade can exist is 60 seconds or 1 minute.
While it’s true that these shorter trade durations give you the possibility of raising your balance faster, the opposite is also true. They have the huge potential to quickly lose your money as well.
In a lot of my guides, you’ll see that I frequently recommend entering trades with a minimum duration of 5 minutes or more, especially when dealing with typically volatile financial assets. This guide will discuss the reasons why you should never do 1-minute trades on Binomo!
Small fluctuations, big damage
The chart below is displaying the EUR/USD pair on a Japanese candlestick chart with a 1-minute interval. Looking closely, you can see that the support level – which is at 1.1400 – has made a change of 0.002 since the last green bar, which had a price of 1.1420.
If you were at a short trade interval, i.e. 1 minute, this incredibly small fluctuation would throw off a lot of the signs that the previous sessions had shown. In short, it is incredibly difficult to determine where the price will be in 1-minute trades, as even something as small as a 0.0001 fluctuation throws off a lot of the educated guesses one can make beforehand.
However, entering a much longer trade, for example, 5 minutes, would make the trends much clearer and protects you from the damage that small fluctuations can wreck. It would then give you a higher chance of having accurate predictions.
This doesn’t happen only in Binomo. Trading in any other platform, with any other financial assets, would give the same results if you’re trading with extremely short durations. If you want to have a better chance of gaining from the market, your only viable move is trading longer trade durations where the fluctuations in prices are less sudden and more observable.
Trading long time frames on Binomo
The 5 minute minimum for trading duration depends on the time interval of the candles on your chart. For example, if your chart is displaying 1-minute intervals, then this is where it would be most advantageous if trades last 5 minutes. However, if you’re using candles with intervals in the 5 minutes, it’s better if your trades extend to 15 minutes, perhaps more.
Trading time frames longer than 1 minute gives the trader ample chance to observe the current price movements and make his or her decision based on careful consideration of the charts. One cannot take in the price direction, various indicators, and the patterns, and then consider all of them and make their decision in less than 60 seconds. As a result, entering a market position in 60-second durations is tantamount to betting on a coin flip.
Furthermore, trading longer frames gives the prices more time to correct themselves in terms of price corrections. Trading shorter durations would give the arbitrary price corrections a lot more power over your trades than they should.
In addition to this, doing shorter trades results in more emotional pressure than trading long positions. Observe the prices in the chart below.
As the uptrend develops, you’ll notice several price correction points. This is where prices momentarily retrace their steps to mitigate the momentum of the dominant forces. In the example chart, you’ll see these consolidation areas as bullish candles appearing in between red candles. If your trade lasted for nothing but a minute, these short retracements will most likely ruin your trades. For best results, use 1m for entries and 5m for expirations.
Even more than that, various rumors are circulating that online brokers manipulate their prices in short time intervals. Although certainly unverified, this still means added risk when trading extremely short positions.
On the contrary, brokers wouldn’t dare to manipulate prices for longer periods as they would be easily noticed. Thus, even though these rumors cannot be tested, it is still much better to enter long positions without the added doubt of what may or may not be true. It’s better for your psychological well-being, as well.
When to do 1-minute trades on Binomo
Of course, this does not mean that you must never trade short positions in your career as a trader. There are times when 1-minute positions can be good for you – these are when the markets are showing clear, strong trends with little price consolidation. The chances of you losing your money at this point are much less compared to ranging charts because strongly trending prices only have one direction to go and they go there fast.
However, this requires constant vigilance and a good understanding of the markets to be able to act fast once you see a trend forming. It’s recommended to always trade with various indicators and support/resistance levels to be able to reliably tell that a trend is forming – whether you’re trading short or long positions, this advice generally stays the same.
That’s it for trading duration basics, how you can use them to trade on Binomo, and why you should never do 1-minute trades except for special instances. Anything we missed? Something you would like to share? Head over to the comments section below and let’s have a good discussion about it!
And of course, don’t forget to sign up for you own Binomo demo account if you haven’t yet!
Good luck on your trading journey with Binomo!