Binary Options trading is at its core a simple way to trade financial instruments. It does not require margin or leverage. What you have is an option with just 2 possible outcomes. If you speculate on price movement and the price moves in that direction at expiry time, you will finish in the money. Conversely, if the direction of price movement goes against you, your trade will end out of the money. The binary nature of these trades is the reason they are universally popular. There are many types of financial assets that you can trade in a binary option format, including commodities (gold, silver, crude oil, corn, wheat and platinum), stocks (Facebook, Google, JP Morgan, Ferrari etc.), indices (Dow Jones, FTSE 100, NASDAQ, S&P 500, Nikkei 225) and currency pairs (GBP/JPY, USD/JPY, EUR/GBP and USD/ZAR). Advanced trading platforms offer alternative binary option investments in the form of Bonds, Bitcoin, and the like.
Why Day Trading is Not Gambling: Technical and Fundamental Analysis
What is particularly interesting about binary options trading is that market fundamentals play a big part in the outcome of the trade. Unlike casino gambling, there are technical and fundamental factors that you can use to assist you in understanding asset price movements. Key indicators like nonfarm payroll data, unemployment, interest rate decisions, inflation rates, PMI data, housing starts and others are crucial to understanding what drives financial instruments. This is where binary options differ markedly from a crapshoot. Successful traders spend hours poring over financial charts, data releases, price fluctuations, webinars, seminars and expert tips. There are ways and means of enhancing your success by understanding the intricacies of the market. Plus, there are many strategies that traders use to gain an edge over the competition. Techniques like relative strength index, moving average convergence divergence, stochastic indicators and the like are effective in painting a picture of where market prices are likely to move. One such technique is using market cycles.
How Important Are Market Cycles in Trading?
Cycles are a part of our everyday lives. We wake up, we go to work, we come home and we go to sleep again. The sun rises and the sun sets. In business, there are noticeable patterns and cycles that we can identify based on current market trends. For example, December is always a big month for retailers owing to the holiday shopping season. Another example of a market cycle is the US presidential cycle. A US president is elected every 4 years. On November 8, 2016, Donald J. Trump was nominated as the president-elect of the United States. He will be inaugurated in January 2017. The presidential cycle is an important market cycle in financial markets. The final two years leading up to a presidential election are always the most prosperous part of the Market Cycles in the US economy. This typically holds true if the president is seeking reelection. For the Obama administration that would have been between 2010 and 2012. Unfortunately, Obama was pressurized by the global financial crisis which hit in 2008/2009. Nonetheless, the overall trend of this market cycle holds true.
Call and Put Options and Market Strategy
When it comes to binary options trading, the importance of market cycles can never be discounted. The good news with binary option trading activity is that you don’t have to wait for asset prices to appreciate to generate returns. You can speculate on asset price movements in either direction – up or down. Conventional wisdom states that you only generate a return if the asset increases in value. Not so with binary options trading. If your forecast is correct, you will finish in the money at a fixed rate of return. Unlike traditional investments, binary options do not put you at risk of losing more than your initial investment. Volatility is always a factor in the financial markets, and it is precisely this element that leads to profitability in currency pairs trading, commodities trading, stocks trading and the like. Without volatility, there would be no buyers and sellers and price would be stagnant. Call options require that resistance levels are broken while put options require that support levels are broken. These terms are everyday parlance in binary options trading.