Binary Options

The Basics of Trading Correlations

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The Basics of Trading Correlations

There are literally endless investment opportunities available at any given time. Each opportunity falls under a specific type of trade category, and a variety of investment methods can be utilized to profit from these opportunities. Trading correlations is one of the most popular trading methods used in modern investing.

Using correlations to determine potential trade opportunities can be rather complicated, so it is wise to learn as much as possible about the correlation ratios and factors used in trading. The common meaning of a correlation is to find a meaningful connection, or similarity between two variables. In the investment world, trade correlations signify an opportunity to profit when the correlations of two variables, or trades, react in a similar or opposite manner.

Basically, two correlating stocks can be competitors, but share similar correlations. When two correlating stocks show a specific pattern of one rising while the other falls, investors can take advantage of these rises and falls by raising or lowering their investment in each stock. Investors can also profit when both of the correlating stocks experience a rise or fall at the same time.

Investors that are attracted to correlating trades have a few responsibilities. These responsibilities include identifying the correlation between two stocks, researching and finding the potential direction these stocks are heading in, and utilizing the data to make sound trade decisions.

When dealing with correlating trades there are a few measurements of correlation degrees that need to be understood. After determining that there is a correlation between two trades, or variables, it is time to determine the statistics and discover the correlation coefficient measurements. A perfect positive correlation, a perfect negative correlation, and no correlation, are the degrees to which stocks are compared.

The perfect positive correlation of two trades shows that the trades move in unison, whether the price of them is moving up or down. A perfect negative correlation indicates that two correlating trades tend to move in opposite directions. Two stocks that have no correlation will show random movements in price and these movements are totally unrelated.

Becoming familiar with how correlating stocks react within a certain time frame is crucial to finding two perfectly correlating stocks to invest in. Taking the time to learn as much as possible about how the similarities of stocks affect the future of two trades will be especially helpful when investing. Even though correlating trades might seem confusing at first, the basic mechanics of trade correlation measurements will start to make perfect sense.

Most investors choose stocks that tend to have a perfect positive correlation to each other. When choosing correlating stocks, investors tend to migrate towards two securities that have higher degrees of price rise and fall correlations. The standard benchmarks for trading correlations are the set measurements that help investors avoid risk. Getting familiar with forex correlation charts and learning the facts used to discover potential profits while trading is essential to success.

Binary Options Trading Strategies

Trading Strategy Versus Trading System

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Trading Strategy Versus Trading System

A trading strategy is a plan designed to establish optimal times to enter or exit trading positions. On the other hand, a trading system determines when to enter/exit trades automatically. The latter generally relies on fancy algorithms, artificial intelligence, machine learning, and neural networks to execute trades within hundredths of a second, which is faster than the reaction times of humans. Here is a quick look at trading strategy versus trading system:

An Overview of a Trading Strategy

In general, a trading strategy consists of a set of rules that define when a trader should execute a trade. In addition, it defines other aspects such as:

  • The number of shares or contracts to buy/sell at any given time
  • Stop loss limits
  • Type of indicators, signals, or triggers to monitor
  • When to execute trades (day or night)

All of these factors play a big role in the formulation of a trading strategy.

An Overview of a Trading System

Trading systems typically use market information to generate buy/sell signals automatically. These systems are widely used by financial institutions such as Morgan Stanley and Citigroup, but individual traders are also increasingly using automated trading systems. According to Celent, a market research firm, the number of self-directed brokerage accounts in 2013 was more than 40 million. In addition, more than 2.4 million traders execute 10 or more trades per day thanks to trading systems. At this point, it is worth noting that you can either build your own trading system or buy one that is ready to use.

Head-to-Head

If you are a long-term trader, a trading strategy will work fine. Nevertheless, your strategy should take into account both micro and macro-economic forces. Additionally, you should subject your system to thorough testing and constant tweaking depending on market conditions. This requires dedication and it can take months or even years for a trader to master the skills required to excel as a discretionary trader. One of the benefits of discretionary trading is it is affordable because you would not necessarily have to buy expensive hardware and software or spend hours learning how to code. In fact, you can start trading immediately after opening an account at a brokerage of your choice.

For short-term traders, systematic trading may give them an edge over other traders. Since many traders now use high-frequency systems to execute trades, a trader who uses the discretionary trading approach is likely to be at a huge disadvantage. However, high-frequency trading (HFT) systems have been blamed for causing erratic market movements. A good example is the stock market crash of May 6, 2010. An investigation carried out by the US SEC and the Commodity Futures Trading Commission found that HFT algorithms contributed to volatility during this crash. Nevertheless, systemic trading has one huge advantage over discretionary trading; it minimizes emotions. It also makes it easy for a trader to backtest trading rules on historical data to determine the viability of an idea.

In conclusion, a financial trader can make money with either a trading system or a trading strategy. Nevertheless, it is important to note there is no trading system that is 100% accurate. As such, the debate pitting trading strategy versus trading system is unlikely to end soon.

Binary Options Trading Strategies

Factors to Consider in Choosing Trading Instruments

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Factors to Consider in Choosing Trading Instruments

Trading instruments include bonds, stocks, commodities, index futures, and E-minis among others. Basically, if an asset, a contract or a derivative can be purchased or sold in a financial market, then it is a trading instrument. Trading instruments can even be trading a debt. To understand how to trade various instruments, you must know what instrument you are trading. Are you trading a debt or an asset, or a contract? Is the trading instrument a derivative of a debt, contract, or security?

Trading instruments are of many kinds. The stock market is however the biggest contributor in this trade. It also has the most expansive variety of trading instruments. Stocks have been known to have a high return on investment making it a very ideal choice for most traders. Deciding on the trading instrument to use can itself be a difficult undertaking. The following are some factors to consider in choosing the trading instruments to invest in:

The Capital At Hand

To make a sound decision, consider the capital you have as well as volatility of the market where the trading instrument will be placed. You need enough capital to promptly place your order avoiding slippages. The capital will also ensure that your transactions are carried out with immediate effect. This is particularly important because stock trading is very time sensitive. Disparities in time can easily be translated to loss on your investment.

Market Volatility

The volatility of the market is directly proportional to the risk of investing in that market. While the risk is high in a highly volatile market, the returns on investment in such a market are also high. This is due to the constant rise and fall of instrument prices.

Available Information on a Given Trading Instrument

It is important to get acquainted with the different aspects of whichever trading instrument you decide to work with. Do not waste your resources on trading with instruments you know very little about. This is primarily how many scams lure people into trading instruments that have huge risks. The scams make promises that entice a new trader into thinking that they have found a way to make a lot of money very easily and quickly. By the time the investor realizes they were tricked, it is usually too late.

If you could ask most people who have lost a lot in this trade, they will tell you that they lost because they had inadequate information to help them make sound trading decisions. Take your time to understand the risk as well as the complexity. Before you agree to use real money in trading any instrument, allow yourself to understand everything about the instrument you will be trading.

The apparent risk and complexity should however not dampen your choice to invest in trading instruments. With the right information and tools, investing in trading instruments can be very rewarding.

Binary Options

When Is a Bearish Signal not Bearish?

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When Is a Bearish Signal not Bearish?

People investing in the share market for the first time often make the mistake of purchasing shares when their prices are on the rise. They believe that the upward (bullish) trend will continue, and if they hang on to their shares for a few days, they can get a good return on investment by selling them at a higher price. This greed for easy money and inadequate knowledge of market trends has financially ruined many investors. On the other hand, investors fear to purchase shares when their prices are falling (bearish trend). However, knowledgeable investors have an uncanny ability to feel the pulse of the stock market and often purchase shares during the bearish phase. While investing in the stock market, you should be able to realize when is a bearish signal not bearish.

Sound Advice from the Guru

The share market is like the sea… it has its ebbs and surges. However, if the rise and fall take place on a frequent basis, then one cannot term the market as bullish and bearish respectively. One of the soundest advice offered by Warren Buffet, the undisputed guru of the stock market is “be fearful when others are greedy and be greedy when others are fearful.” In simple language, this means that you should not invest in shares when their prices are rising abnormally. On the other hand, you should invest in shares when their prices are falling without any reason. However, you should purchase shares of companies that have a solid financial base. More often than not people sell their shares when they hear rumors about an impending worldwide financial meltdown.

Facts Versus Rumors

Instead of checking the local market movements, you should check the share trends of other countries as well. If they are performing normally, and the local market is bullish, it is the right moment for you to purchase shares. More often than not, a bullish trend sets in when a majority of players in the stock market decide to sell their shares in a bullish market and book profits. In such a scenario, the amount of money withdrawn from the market is more than the amount invested. This leads to a temporary bullish phase. This is quite normal and offers you the opportunity to purchase shares of blue chip companies at low prices.

Analyze the Trend

Do not be fooled by the daily or even weekly market trends. It has been proved time and over again that markets surge to a new high after declining for as long as 10 days. Follow the share trends of specific companies over the past few years. Follow the movements of share markets worldwide. During a genuine bearish phase, like the one that reared its ugly head towards the end of the first quarter of 2008, the worldwide share market collapses and remains in that stage for months before recovering. These pointers will help you decide when is a bearish signal not bearish.

Binary Options Trading Strategies

Trading the EUR/USD Currency Pair

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Trading the EUR/USD Currency Pair

Most traders in the forex market like trading the EUR/USD currency pair for a number of reasons. The first reason is that the euro and US dollar are two of the most heavily traded currencies in the world. This means that they have great liquidity. Secondly, the US and European Union markets are the largest economies in the world. This means that the demand for both currencies is always high. The following are important tips on trading the EUR/USD currency pair.

What You Need to Know About the US Dollar

Most international transactions are carried out using the dollar as the base currency. The dollar has for years been used as the reserve currency and the strength of other global currencies are measured against it. While the devaluation of the dollar by the Federal Reserve might have caused some doubt and skepticism about the stability and value of the dollar, the recent economic crisis proved that the dollar can withstand the harshest economic crises. This makes the currency pair an ideal asset to trade in. As you may already know, oil from OPEC and other oil producers is usually transacted in dollars, even if the oil is not going to the United States.

The Euro

Most countries in the Eurozone use the Euro. Sweden, UK and Denmark are the only countries in this trading block that don’t use the euro. This means that the demand for this currency is always very high. Agricultural produce and oil are two types of commodities that are imported into the zone. While some automobiles and electronics may be imported into the zone, the Eurozone exports more autos and electronics than it imports. That said, the euro is the second most traded currency in the world after the US dollar.

Trading the EUR/USD

This currency pair has unique traits. For one, its quote usually varies significantly when both the European and US markets are open for business. However, the quote usually returns to almost its original price. This is usually due to international trade as well as currency speculation by forex traders. This makes the currency pair an ideal asset to invest in.

How to Trade the EUR/USD Pair

There are basically two ways of trading the EUR/USD currency pair. They include:

Forex Trading – There are many forex trading platforms that can help you trade in different currency pairs online, including the EUR/USD. If you expect the quote to rise, you can buy. However, if you expect the quote to go down, you can sell. If prices move according to your prediction, you can recover huge profits.

Binary Options – Currency binary options provide traders with a superb opportunity to profit from accurate predictions of EUR/USD price movements. All you need to do is predict how the price is going to move and take an appropriate position. If your prediction is right, you can get as much as 80 percent return on your initial investment.

Binary Options Trading Strategies

How to Effectively Trade Against a Trend

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How to Effectively Trade Against a Trend

Warren Buffet, the undisputed guru of the stock market, did not become a billionaire by following the market trend. He knew how to effectively trade against a trend. Those following the stock markets know that most investors have the habit to sell their shares and book profits whenever they notice a downswing in the market. This principle might help them earn a small sum, but it will never help them amass millions of dollars. However, smart investors implement a different strategy when the market falls. They purchase stocks of blue chip companies, available at deflated prices, during this period. These investors invariable end up earning massive returns on their investment. You can follow their approach too. However, you should know the basics before investing your money in stocks and bonds.

Study the Company’s Products and Sales History

Purchasing stocks when the market is on a downswing and holding them for a long period allows you to earn maximum ROI (return on investment). However, you should only purchase stocks of leading companies. You should study the products manufactured by those companies and their sales history. Two major companies hold the largest chunk of the carbonated drinks market. Study the prices of the stocks of these companies for the past 10 years and calculate their average. When the stock market is on a downward trend, and you get the opportunity to buy those stocks at a price lower than the calculated average price… purchase them.

Be Patient

The movement of the stocks market consists of zeniths and nadirs. You need to purchase stocks when they are at their ebb. Never try to time the market. Just because the prices of a particular stock is decreasing gradually does not mean that the same trend will follow in the future. Set yourself a target. Make a decision that you will purchase a particular stock when its price falls to a predetermined price, and purchase them when it falls to that price. There is no guarantee that this trend will follow in the following days. The same rule holds good when it comes to selling your stocks. Determine the price you want to dispose of the shares and sell them when it meets your target.

Go Against the Market

Learning how to effectively trade against a trend is a skill that can be honed through experience. Start by investing small amounts of money, but always stick to stocks of reputable companies. You can rest assured that they will never disappoint you and will always provide you with a good return on investment as long as you have purchased them at the right time, hold them for a long period, and sell them when they satisfy your target. These tips might not make you a Warren Buffet, but they will help you earn much more than the average investor. With a bit of luck, you can easily double your investment in a couple of months.

Binary Options

Trade Binary Options from Home: Tips to Know

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Trading Binary Options from Home: Tips to Know

Binary options present unique trading opportunities to investors who want to earn money by taking calculated and controlled risks. One of the main advantages of trading binary options is the fact that it provides you with the flexibility to trade anywhere –even from home. However, understanding variable binary options are critical to your success when trading binary options from home. You must be very familiar with the key variables like expiration, settlement, and strike price when you are ready to trade binary options on a market. Here are some of the key facts about binary options that you need to understand if you want to successfully trade binary options from home.

Create Your Binary Options

You can start trading binary options using a secure trading system in just a matter of few minutes after registering a trading account with a reliable and professional broker. Open the account with a good broker that will allow you to buy options on diverse global financial markets such as stocks, currencies, futures, commodities, and indices. You can trade binary options on major currency pairs such as EUR/USD, GBP/USD, USD/JPY, CHF/USD, and AUD/USD if you have knowledge in forex markets and trading or you can trade oil and gas on the commodity markets if you are familiar with commodities.

Choose Your Time of Expiration

Once you have chosen your option(s), you have to determine how long you would like the option(s) to last. The expiry time for binary options can be as long as one month or as short as five minutes. The time of expiration for binary options may vary though with different brokers, for instance, some brokers may allow you to buy options up to five minutes before the time of expiration. Expiration times can be split into the following categories:

  • Intraday Expiration Time
  • Daily Expiration
  • Weekly Expiration
  • Event-based Expiration

Buy Your Options

There are three different types of binary options to choose from: above/below, range, and touch options. If you believe that the price of your chosen asset will increase in value over time then you will select “Call”. If you think that the price will decrease, you should select “Put”.

Set an Amount and Wait for Settlement

The good thing about binary options is that you can start trading with as little as a dollar ($1). You are also at liberty to purchase multiple options if you have enough equity. Once you have bought your option, you have to wait for the option to expire and collect your return after the option has expired. If your trade ends up successfully, you will receive a certain amount of return on top of your investment.

Bottom Line

Fundamentally, binary options provide a simple way to trade price fluctuations on a financial market. However, before you begin trading binary options from home — or any other part of the globe, you need to understand the basics as well as the risks and rewards of such trading instrument. For instance, there are fundamental and technical reasons that may make the price of a given asset to move in a particular direction. As a trader, therefore, you need to understand how to conduct fundamental or technical analyses to enable you a take an informed decisions while trading.

Binary Options

Is a Binary Options Demo Account Right for You?

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Is a Binary Options Demo Account Right for You?

Binary options can be exciting and financially rewarding.  However, nobody can be an expert the first time they trade.  If you see trading or investing in your future, you may wish to begin with a binary options demo account.

You Can Gain Experience

When you have experience with trading, you will make better choices.  A demo account offers you the opportunity to have this valuable experience.  You can become familiar with the process, and learn about the outcomes of trading.

You Can Gain Confidence

Any type of trading or investing can be intimidating to a beginner.  You do not want to make mistakes.  When you use a demo account, you will develop confidence in your abilities.

There Is No Financial Risk

With this particular type of account, you are not risking any of your money.  You can develop strategies, predict outcomes, and appreciate the results.  When you are not risking your money, a loss is not a disaster.  You can try again until you succeed.

It Can Be a Learning Experience

When you have the chance to try a free account, there is no limit to how much you can learn.  You may start to feel like an expert even though no money is involved.  You can learn everything there is to know about trading, and improve your skills.

Demo Accounts are Ideal for Beginners

People who start trading without any experience are prone to making mistakes.  They are either so concerned about losing money that the entire process is stressful, or they do not take the risks seriously and lose more money than they can afford.

Demo accounts can help you avoid both of these situations.  When you have learned enough about trading to be confident in your abilities, you will be ready to take a sensible approach when you start trading for real money.  It can eliminate stress, and reduce the risk of mistakes.

A demo account will also help you see trading can be fun.  When you start with this approach, real trading will not only be rewarding, but something you look forward to each and every time.

You have decided binary options trading is something you want to do.  You may know very little about the subject, but you know you can benefit from hands-on experience.  Rather than simply reading about trading, you want the chance to try it for yourself.

Nothing could be easier than a method with no risk involved.  You can take as long as you need to understand the entire process, and see what happens when you make trades.  Regardless of the outcome, you are learning something.

You will find short term trading has much to offer.  Whether you decide to try other types of investing, or decide short term trading binary options is the one that is right for you, the best approach you can take is to start with a binary options demo account.

Binary Options Trading Strategies

How Often Should I Trade?

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How Often Should I Trade?

Many beginning traders may ask the question: how often should I trade? Much like with any other facet of trading, this aspect should be considered carefully in accordance to the type of trader that you are. Not everybody will feel immediately comfortable with frequent short term trades. On the other hand, there are many people who will find that they will get bored with longer term, slower trades. As such, it is important to think about how you want to approach your trades and factor that into your considerations when you look into the trades that you have available. Consider some of the following types of trades that you can engage in and see how comfortable you will feel about including them in your trading portfolio.

Short Term

Trades in the short term are often the fastest and riskiest ones to work with. These trades are usually defined by their small trading time frames and how suddenly the market can change in terms of their pricing. This factor is known as volatility, and it can play a very important role in how some traders decide to work with their trading opportunities. These trades have high volatility, which means that they can quickly drop in terms of pricing in a negative situation, resulting in tremendous losses for the unprepared trader. On the other hand, these types of trades can also result in large gains, particularly by those who know how to read indicators and are prepared to work with the market in their favors. Much like with any other trading process, individuals are strongly encouraged to study the market carefully before they work with such trades.

Medium Term

Medium and midterm trades are ones that are defined by their longer trading periods, but by their still relatively high pricing volatility. Traders will find that these types of trades are often easier to work with than short term, but they are not entirely without their risks. Individuals will still need to carefully monitor existing market conditions in order to make the most of their trades. Different markets will also have different volatility rates and pricing patterns, which means that traders will still need to focus on diversifying their assets and strategies in order to succeed.

Long Term

These trades are much easier to manage and can be ideal for traders who are not looking for any type of fast paced trading scene. Individuals who ask how often should I trade, will find that they will be able to work at a much more comfortable pace with these types of investments. For many of these trades, the trading period is enormous, ranging from as little as a month to upwards of a year. Individuals who want to take it slow and plan on watching their trades develop over time should work with these types of trades for their portfolios.

Binary Options Trading Strategies

Using Bollinger Bands Indicator to Influence Your Trades

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Using Bollinger Bands Indicator to Influence Your Trades

One of the challenges faced by many binary options traders is the ability to determine the exact points to pull the trigger and enter or exit a given trade. Luckily, there various technical tools and indicators that have been developed to demystify the process; these tools and indicators have been designed to quickly interpret market signals and easily assist traders make both fundamental and technical decisions. There are various tools and indicators in the binary options trading sphere and it is upon every trader to choose the tool or indicator to use at a given time. Among the top indicators used by most binary option traders is the Bollinger Bands Indicator.

What is Bollinger Bands?

These are set of volatility bands that are plotted above or below an exponential moving average. Since standard deviation is a way of determining volatility, Bollinger Bands changes with the price shifts or movements. The bands widen (shifts away from the exponential average) when the market is more volatile, and contracts (shits closer to the exponential average) when the market is less volatile. To most technical traders, the tightening of the bands is often taken as an indication that the market is about to become more (or sharply) volatile. If the stock prices are closer to the lower band, it means that the market is oversold and if they are closer to the upper bands, the market is overbought.

What You Can Achieve With Bollinger Bands

Generally, the lower band usually displays a support level while the upper band displays the level of resistance. Therefore, if you take a careful look at your Bollinger bands, you will realize that the prizes will often bounce off the bands whenever they hit or touch either the lower or the upper bands. This implies that you can utilize the lower and the upper bands as resistance and support whenever you are planning to execute a trade. Besides, you can use the bands as a measure or indicator of the market volatility. As aforementioned, when the bands (lower and upper) are narrow, you are in a consolidation period when they are wide apart, you are in a strong price movement period.

The Bollinger bands also provide the following vital characteristics:

–          When volatility decreases and the bands narrow, you should expect sharp price movements or changes.

–          When the stock prices moves outside the lower and the upper bands, you should expect the trend to continue.

–          In most cases, prices move from one band to another; so this can help you in projecting your price targets.

–          A reversal is usually experience after a top or bottom is realized outside the bands.

Generally, Bollinger bands are very resourceful indicators that can significantly assist you in predicting where the market goes. The dynamic nature of the bands also implies that with standard settings, the Bollinger bands indicator can be used on other securities as well.