You will learn about the following concepts
- Introduction to assets in binary options
- Trading currency pairs using binary options
- Trading stocks using binary options
- Trading commodities using binary options
An underlying asset is the asset on which the binary option is based, thus the conditions for the option to become “in the money” or “out of the money” are directly correlated to changes in the assets price. Since with binary options you bet whether the price will go up or down, and optionally whether it will rise or fall to a certain level, price fluctuations are the single most important factor you need to be aware of and hopefully predict. The value of the assets is rapidly changing depending on market changes, reports of companies and other economically related news and occurrences.
While choosing your broker, make sure it offers a wide enough range of assets from different financial and geographic markets. Assets can be divided in several main categories and almost every one of them can be traded with a different expiry time. You can find American, Asian or European stocks, indices, commodities, indices futures, etc. Finding the right type of assets to focus your attention on is important. It is advisable to concentrate on a limited amount of assets and master trading them to achieve the best performance possible, instead of dividing your attention between many different instruments and come up with poor or mediocre results at best.
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Choose the right asset
Having practiced on a demo account how to trade different types of assets, you will need to choose a select few and focus on learning their specifics before going live. Most traders specialize in a specific industry/market or one asset category. For example, if you decide to focus on trading currencies, you will need to acquaint yourself with, if not all, at least the economic indicators with high and medium influence on the respective currency (most low and medium, and all high volatility indicators are included in economic calendars).
Meanwhile, if you have decided to trade stocks, apart from the major economic and political events you need to keep an eye on, you will also want to follow up on all corporate news which can affect its share pricing. This includes not only the companies whose shares you are trading, but also their competitors, suppliers, clients – all in all the whole segment it operates in and its horizontal and vertical chains of operation.
The same goes for trading commodities – you want to be informed about everything, after all it is your money that is at stake. This includes important economic data, supply and demand reports and statistics, as well as geopolitical events and developments.
Trading stock indices has its specifics as well. Although the general inflow of information is the same, here you must have a good idea of the broader picture of the stock markets, and especially dissected by industrial sectors. And since some indices, like the blue chips, include companies ranging from the food industry to industrial and high-tech corporations, you will surely need to be constantly informed about any significant developments both on the national and international economical and geopolitical scene.