Binary Options

Why Trade Currencies as Binary Options?

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Why Trade Currencies as Binary Options?

A currency is the established form of money that is circulating in a country. Currencies are highly liquid because of their nature. They are always pitted against each other in the markets to determine their relative strengths. A lot of experienced binary traders go to currency pairs as their underlying asset. Why trade currencies? There are several reasons for this and we will discuss them in detail below.

Plenty of Choices

The US dollar is the most recognized currency in the world today and remains the standard of most measures. The biggest economies also have important currencies because of their impact on global trade. These include the British pound, the Swiss franc, the European-back Euro, and the Japanese Yen. These four when matched with the USD are considered as the major currency pairs. Most investors will trade around them but more choices are available to those who wish to try something different. Some of these do not even feature the USD in the matchup. The trick is to find a broker with offerings that are beyond the usual.

High Volatility

The demand for currencies is so huge that trading volumes are typically very high, especially for the major ones. All of this buying and selling leads to massive volatility as the prices are negotiated based on the supply and demand. The ratio of each currency pair is almost constantly going up or down. For binary traders, it doesn’t matter which direction it goes as long as it is moving. Movement presents opportunities to make CALL and PUT predictions on binary options. The best time to strike a deal is when there is a strong trend as its likelihood of continuing is excellent.

Wealth of Resources

People have been trading currencies for a long while. There is a wealth of resources out on the Internet on the history of each currency and the various factors that affect their value. A person can learn a great deal for free if he can devote enough time to serious study. People must have a solid understanding of economic fundamentals to be able to comprehend why the fluctuations happen. These include the inflation rate, interest rate, the unemployment figures, and the gross domestic product of the issuing country.

Sophisticated Techniques

Over the years, economists and mathematicians have developed techniques to analyze their behaviors. The technical analysis of asset charts is one of the most important tools for trading and a lot of articles pay special attention to their use with currencies. There are indicators that can be combined to get a good sense of where the pair is likely headed. These can be difficult to grasp at first but they become easier as time goes by. Why trade currencies? Why not when you have everything laid out for your success.

Binary Options

Stocks Binary Options

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Stocks binary options

Trading in stocks, also called shares, is the oldest exchange market activity, dating back several hundred years. The essence of stock trading has historically been the purchase of shares in companies or other entities either speculatively or as an investment. The arrival of binary options has been a game changer for the investment world and stocks binary options have become one of the more favored investment mediums.

Binary Options Investing

You should first understand the difference between stock market trading, stock options trading and stocks binary options trading. Stock market trading involves buying and selling of shares for speculation or investment, depending on the investor. When buying stocks or shares, the investor has to lay out the money for the purchase of the stock and only recovers the money once the stock is sold which might be at a profit and possibly at a loss. The stock option involves the purchase of an option to buy or sell the underlying stock at a predetermined time for a preset price. The price at the time the option matures might not suit the investor and the cost of the option is lost. With stock options the price and the time are determined at the time the trade is struck. Binary options rely on the price movement of the underlying stock in a specific time period while actual price of the stock at expiry is only a function of the strike price, either or lower, to determine whether the investor is in or out of the money. Stock binary options therefore mean you only have to forecast whether the price will go up or down without being involved in costly stock ownership.

Strategies and Timing

The timing for stocks binary options trading is often dependent on the timing of company financials or other announcements. These will always have an affect on the volatility of the underlying stock creating fertile ground for trading. Merger or acquisition news, profit forecasts, proposed capital investment outlays as well as general market sentiment all play a part in influencing price movements. With expiry times available from 60 seconds and upwards, the accurate forecasting of the rate of price movement both in terms of time and value is vital. It is important that you stay abreast of the news and maintain an economic calendar giving you the dates and times of the different news and financial statement releases. Market sentiment must also be taken into account because bad news on bullish or good news in a bearish market does not have as marked an affect as in a more stable market situation.

Conclusion

You should try and watch for price volatility when involved in stocks binary options trading ensuring that you are reading the trend correctly and there is a definite trend either upwards or downwards before committing to a trade. Reading a volatile stock market in the wrong direction can prove very costly.

Binary Options

Break Even Point and Required Win Rate

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Break Even Point and Required Win Rate

In a random system with only two outcomes, there is a 50% probability that either result will occur. The classic example for this is the tossing of a coin. You will either get head or tail. If you flip it 100 times, you will see heads approximately half of the time and tails the other half. The same is mostly true with binary options wherein the two outcomes are “Rise” and “Fall”. Investors try to predict whether the underlying asset’s price will go up or down by the expiration date. In order to make profits, people must understand the concepts of break even point and required win rate.

Break Even Point

The break even point is achieved when the amount won is equal to the amount spent. This is a neutral status wherein investors have not lost anything but they haven’t gained any profits either. Knowing where this point lies provides people with a target that they must exceed so as to make their efforts worthwhile. From the paragraph above, one would think that the BEP would be achieved as long as the trader can win half of the time. This would have been the case if the payout was 100% for every win to negate the 100% loss for every defeat. Unfortunately, this is not so.

The major factors affecting this are the payout percentage and the loss percentage. Payouts generally range from 30% to as much as 95% depending on the type of binary option contract and the degree of difficulty involved. A70% payout is common for the traditional binary contracts. Higher rates can be achieved through the more difficult 60 second options and ladder options. Since rates are always less than 100%, the BEP can only be achieved if the winning rate is greater than 50%. This means that traders cannot depend on random luck to bump their earnings. They must consistently beat the odds to earn money.

Required Win Rate

Let’s say an option had a 70% payout for wins and we placed $100 at stake. We compute for the breakeven point using the formula:

BEP = [ Stake / (Stake + Profit) ] x 100

= [ $100 / ($100 + $70) ] x 100

= ($100 / $170) x 100

= 0.5882 x 100

= 58.82%

Therefore, a trader needs to win approximately 58.82% of his dealings just to break even assuming that all of the stakes are of the same value. If he wants to earn a profit, then he should exceed this Required Win Rate. Those who can approach 70% consistently will be able to accumulate a good sum over time. This may be accomplished by utilizing various analytical tools to increase predictive accuracy. Serious traders are proficient in technical, fundamental, and sentimental analysis because they know that these are the keys to exceeding the break even point and required win rate.

Binary Options

Is Binary Options Gambling?

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Is Binary Options Trading Gambling?

The question whether binary options is a legit investing venture or just a gamble has been debated since the 2008 grand inception of this exciting form of online trading. The question has elicited different views with some backing options trading while others dismissing it as an advanced form of gambling. So, is binary options gambling?

Why options trading is referred to as gambling

When binary options was opened to the public market in 2008, they received mixed reactions in the financial world. Some concluded that options trading is nothing but a gamble. A large number base their allegations on the simplicity of options trading. They however lack solid proof to support their allegations and hence they remain to be solely unfounded allegations.

Why binary options is not a form of gambling

Fixed risks and payouts

In gambling, the player bets are exposed to uncertain risks which are subject to change during the game. The risks are not confined to the invested funds but they can sometimes affect funds that are not yet invested. The payouts are also not defined on gambling, but they are entirely determined by winning odds. In binary options, risk and reward are pre-defined and fixed before trade commencement. The risks are also confined to the invested funds and they do not affect funds in a trading account.

Pre-defined trading time frames

In gambling, the length of an event determines the incubation period of a bet. Some events don’t have scheduled end times and hence they can take a great deal of time. In binary options, trading is achieved in pre-determined time frames known as expiries. A trading position is automatically closed once the trading period expires. This can be as short as a few seconds, right up to a year.

Outcomes

In the gambling world, the outcomes of a bet are subject to different events. In most cases an event can have multiple probable outcomes. On the other hand, a binary options trade can only have two outcomes. A trade can either end in the money or out of the money. For out of the money trades, a trader is bound to lose the invested funds either in full or partially while they will receive the greed payout for in the money or successful trades.

Trading tools

Unlike with gambling, when trading options, a trader has access to a wide choice of facilitating trading tools, services and features that help increase chances of winning a trade. Some of the tools can be used to end a trade pre-maturely locking profits in the process. In gambling, a player has no betting tools at their disposal which can help them to more accurately predict the outcome of a bet.

Last word

So is binary options gambling? Well, binary options trading is in no way similar to gambling. As a matter of fact, it is a legit financial investment venture where a trader can capitalize on price movements of the underlying assets in a short space of time.

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Most Traded Market in the World

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Most traded market in the world

The most traded market in the world is the market involving foreign exchange. It is the only market that is open 24/7, and the inherent nature of the market ensures built-in liquidity. This is something that is very important for financial and binary options traders who want to invest in the market.

Why is Foreign Exchange always Tradeable?

The world is divided into 24 time zones, so at any given time, it is always 9 a.m. Somewhere, for example. When it is bedtime in one region, the working day may be just starting somewhere else. Therefore, the world of commerce is always awake.

Even at weekends, where the entire world will share some part of the traditional Saturday, Sunday break, there will still be a demand for foreign currencies. Asian passengers traveling to the USA on vacation, for example, will need US dollars. They can buy them in Asia, or when they arrive in the US. If they come from a small country, they may find it more difficult to sell their local currency in the US. They will prefer to buy US dollars in their home country.

It is the world of international trading that drives the demand for foreign exchange. While the Asian tourist may need just a couple of thousand dollars in American currency, multinational companies buying American goods may need billions. Banks are the ultimate repositories of currency, and the banks move billions in various currencies every day.

Even when banks are closed, their foreign exchange sections will still be trading. When banks are trading, then other exchanges which use the foreign exchange market as the underlying asset, can also trade.

Liquidity

Like all markets, prices in the foreign exchange market are governed by supply and demand. There are many different factors at play that determine the demand for a country’s currency. If the country’s exports are booming, the currency will usually rise in value as demand for it increases.

Political stability is also an important factor in the value of a currency. If you look at any of the countries in the world’s troubled spots, you will see the currency values of those countries are very low.

Financial stability is yet another key factor. Countries borrow money, and if they fall behind on their repayments, their risk factor increases, with an ensuing negative impact on the value of their currency.

While the economic or political difficulties facing citizens of such countries may be bad news for them, it is the ever-changing scenario in world currencies that makes it s great choice for binary options trading. As you can see the most traded market in the world at present is the foreign exchange market, and that is likely to be the case well into the foreseeable future.

Binary Options Trading Strategies

Range Options as a Trading Strategy

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Range Options as a Trading Strategy

There are a vast number of different strategies that have been developed specifically for binary options trading with some of them suited to all trading conditions. Range options on the other hand, are a slightly more complicated form of binary options where there are four possible outcomes, but are classed as trading In/Out binary options which still falls within the binary options parameters.

Applying the Strategy

You will have realized by now that information for binary options forecasting is always available in algorithmic form on the trading platform and with range options, you once again have to do a graphical representation of a trading pattern. When you notice that that trading pattern in a particular asset is flat, you have the best conditions to trade and by describing the graph over a seven day period, the trading highs and lows in a narrow band become obvious. Draw a line joining the highs of the asset price and another parallel line joining the lows, these are called the boundary lines. The price range you select should be slightly above the upper boundary and slightly below the lower boundary and these are your range options prices. Brokers normally allow an expiration date of not less than seven days, which is ideal for your purposes.

Different Options Available

There are four possible outcomes that are possible in the range options strategy and they are as follows.

  1. The price ends outside the range
  2. The price ends inside the selected range.
  3. The price stays between the boundary lines
  4. The price goes outside the boundary lines, but remains within the range

While there are 4 different possible outcomes with range options, whichever outcome you select for your trade can only have one of two results, either in or out, for you to end in the money or out of the money. Staying within these parameters meets the qualification for being binary options.

Best Conditions

Examining the graphical trading patterns of an asset in volatile conditions, you will notice that the price can swing quite dramatically between the highs and lows, making a range options forecast very difficult. When the graph shows a much smaller band as a result of a flatter or ranging market, the range is much easier to forecast as there is an absence of very high to very low swings and that is when you should try to apply the range options strategy.

Conclusion

This is slightly more complicated than the standard yes or no binary options choices you are normally faced with. You would be advised to run a few range options tests to make sure you understand them and can apply the strategy effectively. In common with binary options trading forecasts, in order to be successful with range options you need to study the market and any factor that might influence asset price changes before committing your money to a trading decision.

Binary Options

What are underlying assets in Binary Trading?

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What are underlying assets in Binary Trading?

There are probably a lot of questions that you have now that you’ve opted to enter the binary options market.  Foremost among these is likely, “What are underlying assets in binary trading?”.  While this simple term might seem confusing right now, in a very short while, you will be actively using it in everyday conversations with little thought.

How Binary Options Work

During the formative stages of learning, binary options can seem quite a bit more confusing than other financial instruments.  When you trade stocks, you are actually investing in minute portions of actual companies.  When you purchase commodities, you are investing in tangible goods that really exist, even if you won’t be warehousing these goods in your own home.  With binary options, however, you are purchasing absolutely nothing.  Understanding this fact, it can be hard to see how these financial instruments can be so very profitable.

Underlying Assets

Each time you implement a transaction in the binary options market, you will be making a prediction about an underlying asset.  This is the asset that your prediction is based upon. You do not own any portion of the asset, but can still gain profits by implementing a trade based on an accurate prediction.  More importantly, you can profit from the price movements of an underlying asset, whether this asset gains or losses value, so long as your trading theories are correct.  This is not something that can be said with other financial instruments.

Do Asset Types Matter?

The process of trading binary options could seem simple enough.  All you have to do is guess which way the price of an underlying asset is going to move and then have your prediction come true.  While this is certainly one portion of the process, profitable trading is a bit more complex.  You actually have to guess the strike price of the asset or its final price, at the time of the option’s expiration.  This is called being in the money.

Given the fact that predictions have to be very concise in order for you to win in a trade, it helps to have a keen understanding of the assets that you are trading.  This means that you will have a good knowledge of the different factors that are likely to affect the price of the asset.  The more that you know about an underlying asset, the more likely you will be to correctly predict the movement of its price.  If you implement multiple trades at one time, having different underlying assets as part of these trades will ensure that a single, unexpected market activity doesn’t result in losses across the board.

Conclusion

What are underlying assets in binary options trading?  These are the assets that you will be formulating trading theories about.  You won’t own these assets, but they can certainly help you make a lot of money.

Binary Options

Free Binary Options Charts

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Free Binary Options Charts

If you have used any of the popular binary options trading platforms, one thing will strike you as remarkably common among most of them: the absence of interactive charting tools. Charts are the cornerstone of technical analysis, and since most binary options traders are technical traders, they depend heavily on charts to form their market bias. Without binary options charts, the trader will essentially be gambling.

Binary options charts are available in two forms:

  1. Online charts, accessible through the websites of some software vendors and brokers.
  2. Downloadable charting platforms or software plug-ins.

While most of the charting tools come as paid packages, there are some very good free resources available online, that will be the focus of this article.

FreeStockCharts

FreeStockCharts.com is ideal for binary options traders dabbling in equity assets. The data-feeds are real time, and the charts are well-structured, with a wide array of trading tools. The chart layouts can be customized, and you can even monitor multiple charts simultaneously. You can organize your watch-list, scan and set alerts. And the best part is that it is absolutely free, and you don’t even need to register at the website. All you have to do is install the Microsoft Silverlight plug-in, and you are good to go.

MultiCharts

Multicharts.com has a downloadable charting software that provides high-quality Forex charts for 30 important currency pairs. The charts are also available on a web-based platform. You can view charts for multiple time-frames ranging from 1-minute to up to 1-month. Developed by MCFX, the MultiChart platform is a robust package that has built-in indicators and strategies, one-click trading from charts, high-precision back-testing and automated trade execution. Also, the software is compatible with the TradeStation developed industry-standard EasyLanguage.

MT4

The MetaTrader4 platform is probably the best free source for interactive binary options charts. This platform is offered by many Forex brokers, and comes in the form of a software package that needs to be installed. Virtually anything that you need for extensive technical analysis can be found on this platform. And the best part is that the Metaweb Query Language (MQL), on which the platform is based, supports the building of Expert Advisors (EAs), custom indicators and plug-ins that help in signal generation and automated trading. You can create a demo account at FXCM, FxPro or Oanda, and gain free access to the MetaTrader platform.

Forex Charts Widget

The Forex Charts Widget was developed by Chris Craig and is available as a free download at Softpedia. It is a binary options chart software that allows users to view Forex charts for several currency pairs. The user can select from six different time-frames, four chart types (Line, Bar, Candlestick and Point & Figure), and a set of optional indicators that come loaded with the plug-in.

Conclusion

It will be prudent for new traders to start out with a high quality free charting resource that offer dependable real-time quotes. Subscribing to a paid package will only add to the cost, which a trader can certainly avoid when he is yet to find his way through the market. While selecting a charting source, just make sure it provides for multiple time-frames, and includes the most popular technical indicators and drawing tools.

Investing

What Does Forex Stand For?

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What Does Forex Stand For?

What does forex stand for? Forex is an abbreviation for the words Foreign Exchange, which in turn is a shorthand description for the process by which the value of various currencies is established on an international basis. In general, forex is usually thought of in terms of currency pairs — USD/RUB, for example. This forex pairing signifies the relationship between the US dollar (USD) and the Russian ruble (RUB).

The reason why it is important to think of currencies as pairs is that the relative strength of one currency to another is constantly changing but this may not always be as a result of the same factors. Weakness on the ruble, for example, would make the USD rise in relation to it. Conversely, if the ruble were to retain its own intrinsic value while the USD got stronger, this would also show up as a rise in the value of the dollar versus the ruble but for differing reasons.

While a currency can often lose (or gain) value all across the board against other currencies, it is possible for it to lose (or gain) value against some currencies yet simultaneously gain (or lose) value against others. This ever-shifting kaleidoscope of values would be of very little importance to anyone other than world travelers except for the growth of world trade. As currencies rise and fall, they can affect the value placed upon a nation’s products that are offered for international exchange.

A nation with a weak currency gains a trade advantage in that foreign buyers can exchange a smaller amount of their foreign currency in return for a large amount of domestic currency and thus buy more domestic products for the same amount of money or buy the same amount of products for less money. Conversely, a currency that is strong means that imported goods are cheap but others have a harder time affording the domestic goods available for export.

There is a lot of jockeying as countries try to find the sweet spot in the price of their own currency that will enable the nation to prosper. In many countries that do a lot of business with a specific trading partner, it is often found convenient to fix or peg one currency to the other. This keeps the relationship steady and is often used by exporting nations as a tool to keep importing nations from devaluing their currency pair to the point where it is no longer viable to export goods to that country. Devaluation can thus be a means of escape from an unfavorable balance of trade that currency pegging is designed to prevent.

What does forex stand for? In many ways, it stands for an endless battle as nations strive to win the currency wars and assure their populations of steady prosperity at the expense of someone else.

Investing

Touch and No Touch Options

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Touch and No Touch Options

Touch and no touch options offer options traders an opportunity to tailor their trading experience. Traders consider them to be binary options since there are only two possible outcomes. There is no middle ground. A trader can either be right or wrong. Although they are a bit different from the standard put/call options, they are still a great tool that traders can employ in the fast-paced world of binary options.

New traders can easily understand touch and no touch options. Essentially, the binary options broker assigns a price goal. When a trader chooses a touch option, the underlying security must meet or go beyond that assigned price goal before the trade expires. When this happens, the underlying security is said to have touched and the trader would make a profit. However, if the asset fails to meet the price goal, the trader would only make a profit if he/she opted for the no touch option.

Touch Options

With this type of option, traders earn a profit when the price of the underlying asset touches or exceeds the target price on or before the time of expiry. For example, assume that the EUR/USD is currently trading at 1.301, and the target price is set at 1.302. If you believe that the currency pair will reach the predetermined target price before the time of expiry, you would opt for a touch option.

Example of a No Touch Option

A no touch option is the exact opposite of a touch option. When traders choose this type of option, they are betting their money on the assumption that the price of the underlying asset will not reach/touch a certain level before the trade expires. Assume that you want to buy a no touch option on crude oil. Currently, this asset is trading at $94.45 and the options broker sets a no touch target price of $94.60. If the price of crude oil stays below the target level for the specified time period, the trade will expire in the money and you will earn a profit. However, if the price touches or exceeds the $94.60 level, you will suffer a loss.

Why Touch and No Touch Options are Popular

Imagine that it was possible for a trader to have total control over his/her trading, and that he/she could dictate the price direction and earn huge profits. This is why customization is so important. Traders would be closer to achieving the above scenario if they were able to exert a high degree of customization over their trading. Touch and no touch options are great instruments that traders can utilize to help them customize their trading to their own needs. Regardless of how they employ them, the fact remains that touch/no touch options allow traders to control their trades in a small way.

Inexperienced traders should start with calls and puts before proceeding to touch and no touch options. Once they have a good understanding of simple binary options, they will be able to make smarter predictions about the probable price movements of their chosen assets.