The financial security commission of Cyprus has finally take care of the case of Cedar Finance, one of the binary options brokers that has been offering traders the ability to speculate in financial markets through binary options. The press release was published in Greek in the official website of the financial regulator the Mediterranean island of Cyprus.
There has been already a first statement against Cedar Finance, this took place on December 19, 2013, and there was a second iteration just a few weeks later, on February 21, 2014. This announcement follows a meeting of the CySEC that took place on June 16 of 2014 where the final withdrawal of the CIF 213/13 license took place, this was when the broker was still allowed legally to offer investment services to traders within Europe. Therefore, the T.B.S.F. Best Strategy Finance Ltd society, which owns the brand Cedar Finance and www.cedarfinance.com website, is no longer a broker officially regulated and authorized in the European Union by the CySEC.
The withdrawal of the license to the broker has been applied because of the numerous offenses committed by this broker, whose practices are contrary to the rules of the CySEC “Investment Services and Activities and Regulated Markets Law”. An example of this can be seen in the last infringement of Cedar Finance confirmed by the authorities; which was an offense against section 26 (5) of the regulations of the CySEC, then it was proposed that services to European traders were to be suspended temporarily on December 19, 2013. However and despite the warning of local financial authorities, the broker continued its activities.
Before the latest statement, Cedar Finance had a three month period to regularize their status with the correspondent authorities in their investment activities through binary options. It seems that the broker has ignored the demands of the financial authorities and continued to offer their services without the CySEC license or any other license from another financial regulator. Therefore, Cedar Finance did not respect the law and posed a significant risk to traders and investors. For these reasons, both the CySEC and financial advisors discourage traders who use the services offered by Cedar Finance and any other broker that is not directed by a regulated and authorized entity.
Unlike Cedar Finance, which no longer has the CySEC license, or any right to offer legal binary options trading in Europe, there are numerous binary options brokers that are regulated and have licenses, permits and other authorizations from different financial institutions that reward their quality of investment services. These regulated binary options brokers do not present any risk to traders. Customers tend to have the protection of banks and financial authorities, so that if any inconsistency occurs, any money invested has certain security and might be recovered with help of the regulative entities.
Among these regulated brokers which offer binary options, it is recommended to choose brokers that belong to the large companies and are known as regulated industry trading brokers. There are twelve European regulators licenses, including licensing from the CySEC (Cyprus / EU), CNMV (Comisión Nacional del Mercado de Valores – Spain), AMF (Autorité des Marchés Financiers – Banco de France), CONSOB (Commissione Nazionale per le Società e la Borsa – Italy) or FCA (Financial Conduct Authority – UK).
There are many brokers and therefore, many traders; so newcomers must consider that they have a lot of brokers at their disposal. But if a trader arbitrarily picks a broker, a big risk is being take. In this case, it is highly possible to choose an unreliable broker which doesn’t have a good relationship with its traders or any sort of guarantee in terms of security of payment and deposit. It is recommended to get acquainted with whichever are the most trusted brokers at the time.
Some of the most trusted brokers are 24Option, OptionBit and OptionFair. They require a minimum deposit of $250, $200 and $250 respectively. Also, all three of them offer demo accounts for newcomers.
If a trader selects one of the brokers recommended above there’s little room for mistake. These brokers have been established for years and have repeatedly shown to be of quality regarding their traders. They can be considered some of the most trustworthy brokers at the time; but just like everything on the binary options market, variables are very volatile and a broker might declare bankruptcy overnight. This is why traders must be aware of any sort of suspicious movement made by their broker. The already-mentioned most trusted brokers have no interest in deceiving customers whatsoever.
It is important to be able to maintain a streak of successful transactions while trading binary options. And that is not possible if a broker offers an awfully bad payment rate. Imagine that the trader receives only 50% return of the trade in their account, and 0% if the option is out of the money. Would it be possible to succeed in trading in this manner in the long run? It is quite obvious that this would not be the case. Traders have to be successful in 70% of their trades just to get even. If, on the other hand, a fair payment of 85% and 0%, things would be much easier if trading is done correctly, also it could generate high payment rates.
Overall, what’s important is that the broker has a good position when compared with other brokers. In this market, traders should not compare, for example, a NASDAQ stock with an EUR / USD stock, it would be just like comparing dogs and cats. If traders want to know how good of a pay the broker is offering, then they should compare EUR / USD on a broker with EUR / USD in another broker.
Customer service is also becoming increasingly important to determine whether a broker is trustworthy or not. In this area, the quality parameters stand in whichever language is available, speed of service and potential helpfulness provided by the customer service employee. There are employees who can solve problems within minutes and there are those who postpone the issue until the customer gets tired. It can also happen that the trader gets a certain amount of emails for several days stating that the problem is being processed, and that the client will be contacted when there’s some progress on the issue.
Through technical analysis trading, traders try to collect all the necessary information concerning only movement of prices in the market and one of its most important principles which is basically that markets are driven by trends and there is a whole array of factors that can influence these, it is known that the mood of investors, information available to them, and other factors can manage to influence the behavior of prices are already expressed in the chart.
One of the basic principles upon which technical analysis leans itself is that everything is reflected in the price, as it assumes that all factors that can affect the market, whether social, political, economic, speculative or any other kind of factor are already reflected in the price in a direct manner. Therefore, if a trader analyzed the price of an asset or market, what they are doing is indirectly analyzing all the factors involved in that market. By many people, this statement is considered exaggerated and pretentious, but actually all it says is that the price will reflect all changes between supply and demand which is what actually originates price fluctuations.
That is, whenever demand exceeds supply, the price rises logically and conversely when supply is greater than demand the price begins to fall. Thus the technical analyst uses this knowledge and concludes that when the price of an asset rises, it is because supply has exceeded demand and if it has a low price, it is because supply exceeds demand. It is clear that the graphs do not move by themselves as they are key factors which cause the price to rise or fall through changes in the balance between supply and demand.
However the technical analyst is not interested in analyzing or understanding the fundamental factors behind these changes, since they are only limited to study what implications do these changes occur in, which in the end, are the prices. Therefore, it is stated that fundamental analysis becomes a causal analysis used to determine why certain behaviors in the market occur in the first place, while technical analysis is an analysis of consequences, that is used to make changes occur from these fundamental factors directly without studying them.
A very important part of technical analysis is based on the study of emotions and human psychology, so basically this principle is to say that humans generally tend to behave in the same way regarding circumstances that are equal or very similar. For example, technical formations that appear in the graphs are following the “bull” or “bear” sentiment that the market has at some point, which in turn tends to behave in the same way to similar circumstances. In other words, the technical analyst assumes that if certain technical training behaved a certain way in the past, will do it the same way in the future, which can be understood by the following sentence: “The best way to understand the future is by studying the past “. These guidelines are what basically define technical analysis as a investing set of indicators.
The Martingala method means that although it is easy to be wrong on a bet (on a coin toss, for example), it is very difficult to be wrong many times in a row. Just like the toss of a coin, it is similar to think of market prices going up and down (although there is a certain relationship with stock trading).
In this example a player will bet that the coin will fall on tails and he loses. It is perfectly normal. The probability of winning was 50%. However, if the player bets tails, then he loses, and keeps losing several times in a row, each time has a higher chance of resulting in a winning bet. The system that involves being wrong several times in a wrong developed into a Martingala system.
How to do the Martingale system?
A player bets 1$. If he wins, he takes it; if he loses it, he leaves his bet.
The player loses because of the 50% chance of losing.
Now the player bets 3$, double the initial bet +1$. If the player wins, he gets 3$; if he loses, he leaves it.
Now the player bets 7$, double the initial bet +1$. This is repeated until the margin is widened as comfortable as it is possible.
How does the Martingala method work?
The probability of losing 1 time is 50% (very high)
The probability of losing two times in a row is 25% (high)
The probability of losing three times in a row is 13% (important)
The probability of losing 5 times in a row is 3% (non-negligible)
The probability of losing 10 times in a row is 1% (almost negligible)
The probability of losing 20 times in a row is 0.0001% (almost impossible)
It’s a matter of waiting for the losing streak to break. And the basis is that sooner or later, it always happens at some point. The method works in theory, but in practice, it is difficult to implement.
Let’s say our player bets 1$ every 5 minutes. With this system it is possible to win 12$ per hour. This is not as much. We can assume that a player can play for 10 hours without rest, 22 working days per month, but several of your business expenses and taxes half of what you earn takes. So, the player earns about 1300$ per month. The probability of catching a bad run of 20 negative points is very low, but to be able to maintain a considerable profit margin it is necessary to bet more than one million dollars to do so.
For starters, it is not easy to have a system with an accuracy rate above 50%. And if it’s not possible to do so with the Martingala method, it is best to let it go. The reality of trading is that it is not random. This is a great advantage. If traders are good and they are able to identify good windows of opportunity with high probability of success, they can apply Martingale in very specific moments.