This guide will cover the fundamentals of over-the-counter (OTC) trading, including key facts to remember, Binomo’s OTC offerings, and a step-by-step process for trading OTC on Binomo’s platform. Furthermore, we will also discuss the associated risks, pros and cons, and ultimately, whether you should do it or not.
Key Facts about OTC Trading
- Definition: Binomo’s OTC assets are off-market securities that reflect the market perception of those assets during the weekend.
- Value Proposition: Binomo’s OTC trading allows you to trade beyond regular market hours and during weekends (Fridays at 9 PM to Sundays at 9 PM UTC).
- Limitations: Compared to Binomo’s regular trading, there are fewer assets you can trade via OTC. Also, you can only do OTC trading during off-trading hours.
- Volatility: Generally speaking, you can experience larger price swings than standard trading on regular market hours (weekdays).
- Trading Approach: A distinct trading strategy is optimal for Binomo’s OTC trading due to differences in market dynamics versus regular trading.
Does Binomo offer OTC charts?
Just like with standard assets on the platform, Binomo offers charts on assets that can be traded via OTC. You can use these OTC charts to make your analysis anytime. However, you can only trade these supported assets on off-market hours when traditional markets are closed.
Key Facts of OTC Charts
- Definition: A graphical representation of trading activity, prices, and other relevant data for trading via OTC a selected asset.
- Price Movement: OTC charts show the price fluctuations, including trends and patterns of OTC assets over a specific period.
- Volume: It also displays the volume of the asset being traded, providing key insight into liquidity and volatility.
- Time Frame: It can be adjusted to show data over various time frames, such as daily, weekly, monthly, or even intraday (seconds, minutes, and hours) movements.
- Indicators: It also supports technical indicators such as moving averages, Relative Strength Index (RSI), and Bollinger Bands to help with your trading analysis
(Risk warning: Trading involves risks)
How to Trade OTC Charts on Binomo Over the Weekend
Step 1: Create an account with Binomo
First and foremost, you need to set up an account with Binomo. To do this, go to Binomo’s official website at www.binomo.com and click “Sign Up” at the top right corner.
Note: You can sign up using your Email, Facebook, or Google account.
Step 2: Deposit funds into your account
Second, make your initial deposit. The minimum deposit is $1, while the minimum withdrawable amount is $10. Below is the tier list and the corresponding privileges you can get depending on your total cumulative deposit on Binomo (the total deposit you have made since the very beginning).
Step 3: Load up Binomo’s charts (www.binomo.com/trading)
Third, on the interface, select the “+” icon in the top left corner. This icon contains all the tradable assets you can choose from.
(Risk warning: Trading involves risks)
Step 4: Choose your OTC assets to trade
Fourth, to trade OTC assets, look for those with the “(OTC)” mark. These are the assets that can be traded via OTC. Some of these assets include DAX/EUR, NDX/USD, DJI/USD, and SPX/USD.
Step 5: Perform your analysis and trade
(Risk warning: Trading involves risks)
Finally upon selecting your preferred OTC asset, you can then perform your trade analysis before placing your trade. On the OTC chart interface, you can see six icons in the bottom left corner. These are:
Timeframe
This tab allows you to select your preferred timeframe for your OTC chart, which can range from 5 seconds to 30 days.
Chart Type
In this tab, you can choose your preferred chart type: a line, candlestick (the default type), mountain, or bar.
Trading Tools
This tab has two sections: Indicators and Strategies. In the Indicators section, you can choose from a wide range of technical indicators as well as Binomo’s social trading platform (at the top of available options). In the Strategies section, you can choose to follow and apply different trading strategies with varying difficulty tiers (beginner, experienced, and professional).
Drawing Tools
This tab offers various drawing tools to help with your analysis, including marking key price levels, identifying points of support and resistance, and predicting probable future price movements.
Trading Signals
If you upgrade to the VIP tier (minimum cumulative deposit of $1,000), you will also have access to Binomo’s proprietary trading signals, which generate buying alerts for its VIP users. However, following these signals is entirely at your discretion and is not 100% accurate.
Multi Window Mode
Finally, the multi window mode allows you to trade two assets simultaneously without switching between the tabs. However, similar to trading signals, this is only available to VIP tier and up users.
Risks of OTC Trading
- Interest Rate Risk – OTC assets, particularly currency pairs, are reactive to sudden changes in either or both of the pair’s home interest rates
- Regulatory Risk – Generally, OTC assets are less regulated, which can increase the potential for bad actors.
- Liquidity Risk – Generally, trading volume during off-market hours is lower, leading to less liquidity. Hence, this causes relatively bigger price spreads or “wilder” price swings.
Market Manipulation Risk – Due to lower volumes and less regulation, OTC markets are more susceptible to price manipulation by larger market participants. - Overtrading Risk – On an individual level, the appeal of off-market hours trading (which allows many to trade on weekends) can lead to overtrading, particularly among inexperienced and undisciplined traders.
Pros and Cons
- Flexibility: OTC trading provides flexibility to trade beyond regular market hours. This is helpful for those traders unable to trade during standard market hours on weekdays.
- Access to Unique Assets: OTC markets often offer assets that are typically unavailable on standard markets during normal trading sessions.
- Capitalize on Off-Market Events: OTC trading allows you to take advantage of specific events that transpire beyond market hours (or over the weekend).
- Practicality: OTC trading can be more practical for part-time traders, especially those with full-time jobs during market hours.
- Niche Market Opportunities: OTC trading can offer niche trading opportunities that are less common during regular trading days and hours.
- Regulatory Oversight: OTC markets and assets receive less regulatory supervision, which leads to less transparency and a higher susceptibility to market abuse by bad actors.
- Limited Available Assets: There are only limited available assets that can be traded via OTC. For Binomo, less than 10 OTC assets are available to trade.
- Lower Liquidity: OTC markets and assets have relatively lower liquidity, which can lead to wider price spreads and larger “gaps” and swings.
- Heightened Speculation: OTC trading presents a higher degree of speculation particularly on what might happen in the next regular trading session (Monday).
- Complexity: Some OTC assets are relatively more complex and may pose significant risks, particularly for beginner and inexperienced traders.
Conclusion
With all these considered, we can see that OTC trading offers a unique value proposition of having the ability to trade during off-market hours. Despite this, we do not recommend trading OTC — particularly for beginners and inexperienced traders — as it presents a higher degree of risk. This is because these assets have generally lower liquidity yet higher volatility, resulting in larger price swings.
(Risk warning: Trading involves risks)
Most Asked Questions:
What is OTC trading on Binomo?
Over-the-counter trading, or simply OTC trading on Binomo, involves direct trades between two parties without using a centralized exchange. This type of trading allows Binomo users to engage in transactions on off-market hours and days when traditional markets are closed.
Do you need a different strategy for OTC trading?
It depends on your existing strategy. However, it is often optimal to tailor-fit your existing strategy or develop an entirely new one for OTC trading. This is because you need to account for the relatively lower liquidity yet higher volatility. For example, strategies that work well on high-liquidity assets may perform poorly on OTC assets.
When can I trade OTC on Binomo?
OTC trading is available from Fridays at 9 PM (UTC) to Sundays at 9 PM (UTC). During this two-day period, you can trade OTC assets such as DAX/EUR, NDX/USD, DJI/USD, and SPX/USD.
Is OTC trading riskier than regular trading on Binomo?
Generally speaking, yes. OTC trading is widely considered to be riskier due to less liquidity, higher volatility, and the decentralized nature of trades being done, which can affect the asset’s price stability as well as execution.
How do you monitor your OTC trades on Binomo?
You can monitor your OTC trades directly through the Binomo trading platform, which offers real-time updates on your positions and price movements of other OTC assets available to trade. In addition, you can monitor these assets on your desktop or laptop (through their website) and through your mobile phone (through their app).
