Free binary options signals
Free binary options signals can end up costing you a lot of money. If you want to use signals you should make sure to use a good signal service. A good signal service will earn you a lot of money regardless of how much it cost. A bad signal will cost you a lot of money even if the is free.
A good signal is a signal with a high success rate. A signal that ends in the money a large percentage of the time.
I know that is very easy to get tempted to start looking for a free signal when you see the often very high prices of paid signals. Do not give in to this temptation. You should never be looking at the price of binary options signals or other similar products. The price is irrelevant. All that matters is the value they provide. If the expected value a product provide is higher than the price of the product then you will make money by buying it. The expected value of a financial product is usually easy to calculate but you should be aware that your results deviate from those that you would expect based on the expected value. It is therefore very important that you track your success to see the true value of the product.
How to calculate expected value
The expected value of a signal is easy to calculate provided that you know four things:
- What success rate does the signal claim to offer (3rd party figures are better if available)
- What signal frequency does the signal service offer. IE how many signals will you get each day.
- How large return will your broker give you if an option matures in the money?
- How much do you plan to invest in each option. (you should always invest the same amount in all trades when using a signal service. If you do not you might not make money even if the signal quality is high)
Once you know these four things the expected value can be calculated in your head or on your phone.
Example of calculations
Below we are going to calculate the expected monthly value based on the following values.
- 80% success rate
- 5 signals each day
- The broker gives you a 75% return on the options that mature in the money.
- You invest $25 in each trade.
We know that we can expect to get 150 signals each month (5 a day * 30 days)
We know that 80% or 120 of these signals will mature in the money. 20% or 30 options will mature outside the money.
The 120 options that mature in the money will earn you 120 * 18.75 (25* return of options (75%) = 18.75) for a total of 2250
The 30 options that mature outside the money will cost you 750. (30*25)
You total profit and expected value is 2250 – 750 = 1500$ a month.
Once you see that a signal is able to give you an expected value of 1500$ a month it is easy to understand why it is well worth paying 100 or even 200 a month to get access to that signal. Calculate the expected value for all signals you can find (paid and free) and deduct the price from the expected value. You are then ready to compare the different signals in a meaningful way. Choose to subscribe to the signal service that offer you the highest expected value regardless or price.