From the California Business Journal newswire
Binary options trading is a simple way of trading money online based on price movements. It borrows the concept of options trading, which only requires two things from people: a small amount of capital, and the ability to predict the final value of a commodity or currency pair within a given time frame.
Unlike futures, trading binary options can be really fast. Trades can end in a day, a few hours, or even 60 seconds.
Commodities and currency pairs
In order to be an effective trader of binary options, you must first choose a commodity that you’re knowledgeable about. There are plenty of commodities being traded on the market like barley, coffee, cocoa, cotton, gold, rubber, wool, and oil. If you are not knowledgeable on commodities, you can also choose Forex currency pairs like the USD/EUR or JPY/GBP pairings.
Once you’ve chosen a commodity or currency pair, you must carefully monitor its price movements and predict whether the value will move up or down at a certain time. If your prediction is correct, you’ll get $100 minus the price of the binary that you’ve bought and the mark up from your broker. If your prediction is wrong, you get nothing and lose your money. Keeping track of these movements can be done online, as you can monitor price movements of commodities and currency pairs on Bloomberg and other reputable financial news sites.
The internet should be your main resource due to the wealth of information on binary trading. Nadex provides an overview of binary options trades for beginners, while also outlining information on the different aspects of binary trading. In the example provided by Nadex, all you have to do is choose whether the price of the commodity, which is currently at $1,700, goes up or down in your preferred time frame. If you think it’ll go up at 3 PM, you buy the binary. If not, you sell.
Which commodity or currency pair should you choose?
Technically, you can choose any commodity or currency pair that’s being traded online but experts suggest choosing something volatile. The more volatile the prices, the more options a binary options trader have since this form of trade feeds on fluctuations.
Gold, for one, is a very volatile asset, and its prices can sometimes increase by 20% in just several months. For example The Telegraph has an article on gold’s rally last year, which proves how the precious yellow metal’s prices fluctuate regularly. In January 2016, the commodity’s prices were around $1,070. By April, however, the prices were already at $1,220. It is through monitoring dependable news sources across the globe that you will be able to track and monitor volatile assets like gold.
Strategies involved in Binary Options
The binary options trade isn’t like gambling where people mindlessly put a bet on an outcome. Binary options involve fundamental and technical analysis just like any other trade. Fundamental analysis is researching news and tracking down consumer behavior associated with the economy. Conversely, technical analysis is about studying the charts of commodities and currency pair in order to make a good inference on the price shifts.
Apart from fundamental and technical analysis that help make good price predictions, a strategy called the Martingale technique is also being used by binary options traders. This trading technique makes people double the amount of their initial investment at each loss until a profit is gained. It has higher risks than gains but the idea is to offset losses of previous transactions until a trader gains his or her target amount.
There are plenty of resource materials out there that can be beneficial for binary options trading. Remember to study them first and download a free trading tool so you can get a good grasp of this particular trade. We at California Business Journal have several articles on current events that may help you with your fundamental analysis research.