In essence, yes – binary options are, indeed, simple financial instruments, which even newbie traders can understand and deal with. All that the trader needs to do, before purchasing a call or a put option, is to figure out whether the strike price for a given asset is going to rise or fall. Sounds easy enough, right? It is, indeed, one of the least complicated systems of option trading, since it doesn’t take into account the amplitude of the price change. It also provides a lot of diversity for traders, since expiration can be customized from a matter of minutes to days. To boot, it’s also a relatively safe trading system, in the sense that options buyers know right from the start the ratio of both their potential losses, as well as that of their potential gains. If you want to learn more about the definition of binary options, there are plenty of resources available online, amongst which one of the most popular in its efficiency is a video lecture from Yale University’s Professor Shiller.
Now, in case you already feel versed enough in the theoretical background of the binary options trading system, before you go looking for a broker or decide which asset or which global market you want to trade in, you should also take a look at some useful resources for trading. Binary options might be simple, yet they are, after all, financial instruments – some have likened trading them to gambling, but this kind of amateurish approach unfailingly ends in disaster, especially for the long-term. Binary options require the buyer to invest money in them, in hopes of collecting attractive ROIs. In order for you to do just that, today we bring you four essential resources for setting up a binary options trading system you feel comfortable with.
The key difference between your ordinary gambler and the professional binary options trader is the very tool of analysis. While the latter might sometimes (successfully, even), base his bets on spur of the moment hunches and other resources that have more to do with instinct than with reason, the former always needs to perform some form of market analysis before trading.
One example of such analysis has to do with keeping a watchful eye on the news – as any binary options trader knows, markets are always quick to respond to news releases. Check out any asset chart and you will notice the existence of either major bullish or bearish candles immediately after some news announcement or another. One strategy of trading in binary options, which is sometimes referred to as hedging the news, takes this very pattern of evolution into account. The trader keeps an eye out on two monitors simultaneously: one for asset charts and the other one for orders. Usually, the news will determine a candle, either upward or downward (heavy buying or heavy selling activity). Binary options traders that hedge the news take such candles into account and employ a double-pronged approach to trading. They will spread bet on one outcome of the news candle and purchase a binary option call for the opposite outcome. By carefully budgeting and timing their pips, they capitalize on this type of hedge investment – the key is to calculate a stop loss threshold for spread betting, while also making sure that your potential gain from the binary option is at least equal to the stop loss. This way, any potential spread bet losses can be offset with binary options.
There is no way to go about trading binary options without charts (as you may have already noticed in the above example). Charts give binary option traders all the information they require, in order to trade options for one asset or another. Specifically, they provide the history of the evolution of the underlying assets’market value, which, in turn, can inform the traders’ predictions of strike prices. Charts allow traders to observe the patterns according to which underlying asset prices move – this is useful both for binary options trading, but also for playing the boundary (trading in/out), as well as for figuring out whether the asset is going to move sideways, for consolidation. For more information on the different types and functions of charts, visit the binary option trading site that can provide the most accurate information on this matter.
There is a lot to be said on the topic of signals – most importantly, that they need to be analyzed, either by the traders, brokers, or market analysts themselves, or that they can be generated by automated financial tools. Signals represent the analysis of trading activities and, with the aid of indicators (see below), they help traders articulate their own analysis. Most beginner binary option traders find signals very useful for their understanding of the trading game. There are plenty of signal tools and analyzers available online for binary options. If you’ve never traded before, you would be best advised to find a signal provider that you can trust, before you start trading. Technical analysis, as hinted to above, requires the trader to thoroughly understand how indicators and charts work, and how to do combined readings of the two. This is not exactly easy to understand for beginners, but, with time, can be honed as an options trading skill.
Technical indicators also exist in order to help traders make accurate market predictions and are ideal for use in conjunction with charts. For instance, some traders will look at a particular technical indicator for an asset, as well as the average trend indicator, in order to determine the evolution of that asset’s price. Crossing over the two average indicators will often paint a clear picture of whether the price is heading up or down, thus helping the trader decide whether to go in for a put or a call option. Useful tip: technical indicator crossover analyses can be used for trading in an ample array of options, not just binary ones. Expert traders will invest in high/low options, in/out options and touch/no touch options. They will score wins in all options, provided their calculations are correct. Most pro traders, however, advise beginners to make sure they have a firm grasp of technical analysis before attempting to multiply their profits with such a strategy.