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As of late the word bucket shop has been thrown around a bit, whether or not forex micro-lots fit this description I have no idea but I do know of one trading phenomenon that has clearly stacked the odds against those retail traders that choose to participate.

For those of you that don't know what a binary option is here is a quick synopsis . Basically they are kinda similiar to regular options that you would trade at your local stock broker except that when you buy lets say a call binary option for the Eur which is currently trading at lets say 1.4235 you will gain 75% return if the EUR ends the day (3:00pm at one particular broker) above that price even if its only one pip above that price at say 1.4236. At first this sounds like a sweet deal 75% return on your money and you only need to be right by one pip but always theres a catch of which this one seems to swing excessively in their (the brokers) favor. When you are wrong and the EUR ends the day below our strike price of 1.4235 you lose either (depending on the broker) 100% of your money or sometimes they try to entice you with a 15% money back guarantee when you are wrong which at first seems like a good deal but really thats just saying when your wrong you lose 85% of your invested capital.

Many successful traders would admit that most of the time their percentage of profitable trades is many times as low as 50% and many times even lower, and that the only reason they make money trading is strict money management rules that turn a 45% win ratio into a profitable system only because they are making 2 or more times more on those fewer winning trades than their losers. this simple fact really throws up the red flags for retail traders that are so easily sucked in to the hype. I have demoed a few of these binary options platforms and have not had a good time, its way too easy to win a few times only to give it all back when you inevitably make the wrong call. I think I'll stick to things that give me an edge, not the broker.

So since we have established the fact that these binary options dealers are really not looking out for the common man. Your probably wondering why I would bring this up. The reason is Eztrader.com seems to be getting a bit desperate maybe the world isnt made up of as many saps as they previously thought so now they are giving away what looks to be free money and I have stumbled upon a very interesting article written by a gentleman that claims that he does quite well using binary options as an effective hedge for his forex trades.

http://www.tradesmarter.com/2009/06/...forex-trading/

This is the only manner in which I would get involved with binary options if in fact I could hedge my forex trades in some manner that made trading sense, and it seems now is the time to do it with eztrader offering bonus money, but I still see many holes in this strategy.

Can anyone think of a strategy that would make sense and work well with binary options as a hedge?