You will learn about the following concepts
- Introduction to stock trading
- Trading stocks using binary options
- Market sentiment, earning reports
Stock trading enjoys a growing popularity in the binary options market. More and more binary options traders rely on stocks, because it is fairly easy to determine their short-term movements, especially following the release of corporate news or earnings reports. However, keep in mind that trading is risky and no strategy is 100% foolproof, and stock trading makes for no exception.
One of the simplest strategies that binary options traders use is to find a stock which has gained momentum on the base of solid fundamentals, and bet that it will continue rising, or falling. Of course, this may sounds way too simple, but it is the most basic way to earn profits from trading stock binary options.
International Stocks Trading
Trading stocks may sound like the best way to invest your money in the binary options market, but there are some things you should know before taking this step. First of all, stocks are different from the majority of assets that can be traded on the binary options market. You should know that stocks are only available for trading during specific hours. This means that you won’t be able to trade 24/7 and your trading activities will be limited to a certain time window.
Another important fact is that brokers have taken measures to ensure that trading stock binary options is not too easy. As we already mentioned, trading stock binary options is only available at certain times. However, many brokers won’t let their clients make a trade at least half an hour after the market opens – this way the traders are unable to trade stocks during the time in which they are the most volatile.
Trading Stock Binary Options
Trading stock binary options can be a great way to increase your profits, especially if your trading portfolio has room for expansion. The more diversified your stock portfolio is, the more secure it is, particularly when it comes to binary options with longer maturity. This way, if a certain sector is hit by bearish news (for example, declining copper demand will hurt mining companies), only a fraction of your capital will be exposed to that risk, since the other stocks you have invested in are from a different sector and will be unaffected. Of course, you must approach this type of options very carefully, because it is very important that you choose the right stocks and create a solid trading plan that you will follow closely.
Factors at play
There are four main factors which have a huge impact on the value of stocks:
- Market Sentiment – if the markets are gloomy and the global economic climate is poor, then investors won’t spend their money on stocks and therefore their value will fall.
- Earnings Reports – Good or bad earnings reports often cause a rapid movement in the value of certain stocks.
- Mergers & Acquisitions – These events can spur both positive and negative sentiment and are accompanied by high volatility, so you should conduct proper analysis before purchasing a binary option following M&A activity.
- Political uncertainty, geopolitical tensions – Political crises on a national level cause investors to stray away from the countrys stocks and invest their money in more secure assets, aiming for capital retention instead of appreciation. Additionally, geopolitcal tensions between two or more countries, especially when Major powers are involved, cause a global outflow of funds from stocks and into safe-haven assets, such as precious metals, the Japanese yen and so on.