As with forex trading, with binary options trading you have a handful of types of orders available. We’ll make a list of them and you should use them in order to fully understand their purpose
Why is it important to know all the type of orders available and not just stick to a few?
Because the market behaves in different ways and by knowing all the types of orders available, you can adapt to different circumstances and manage to profit from unexpected movements.
Also, by knowing all the order types that are available out there, you can use it as a way to choose your broker. Not all the brokers are offering a wide variety of binary options orders so you should focus on the ones who do.
High/low binary option – this type of order requires you to speculate whether a particular asset will be higher or lower. The key moment is the expiration time, that’s when the price should be higher/lower, depending on how you place your order.
Call/ put binary option – one of the most popular types of orders, similar to the one above. Also, another important type is the 60 seconds binary option, commonly used by traders.
One touch binary option – a trader can profit from this kind of order when the price of a particular asset reaches a predetermined level, also known as trigger. It is very helpful when the market is moving impulsively in a particular direction.
No touch binary option – as opposed to the one touch binary option, the no touch order requires that a particular asset won’t reach a predefined level, before the expiration time.
Double No touch / Touch binary options – The same rules apply as above, only this time the option will have two triggers, not just one.
Range binary option – this type of order requires that the price of a particular asset should trade in between a top level and a bottom level, aka range, before the expiration date. If the price won’t break the range before that, you will be in the money zone and make profit.
Short-term binary options – there are a lot of binary options categories included here and the difference between them is the expiration date. 60 seconds, 2 minutes or 5 minutes are the most popular and can be used to speculate small moves of prices.
With that being said, these are the most important type of binary options orders you should know and make sure the broker that you choose will have them available for you.
As an old saying says “When something is too good to be true, so should think more about it”. Since we’ve talked about four advantages of binary options trading in one of our previous material, we want to focus this time on four disadvantages of trading binary options so you won’t be aware of the risks involved in this area.
As a brief risk remainder, so should be aware that speculative investments carry risk and you can lose money, so before jumping into it you should understand both the positive aspects and the negative ones and only then see if it is appropriate to invest your money.
The main pitfalls of binary options trading
- Lack of regulation – since binary options are relatively new instruments, there is no significant regulation around it and because of that there are few agencies who can monitor this sector.
- Poor reward to risk ration – even though you manage to find good trading opportunities, with binary options you will make around 90% profit on a winner and lose 100% of your risk if the market will move against the direction you thought it will go. Having higher than 50% accuracy is a must if you want to generate long-term profits with binary options trading.
- Few order types – call/put options are, in general the only options you have available, since you just have to speculate the direction of the price over a given period of time. No limit of stop order, in comparison with the forex trading.
- No stop loss order – even though you see that the market is going against of your direction, you are not able to close your position, before the option expires. This is one huge disadvantage as being able to close it ahead of the expiration can help you reduce a huge part of the losses. Lately, some of the brokers begun to introduce that option as well.
This are one the most important negative aspects you should consider before starting to invest in binary options. Hope the material helped you understand some key concepts about this subject.
Following recent slump in US equities, generated by the rising tensions between the US and North Korea, which culminated with the latest missile launch over Japan by the communist regime, the Dow Jones managed to find support again around the 21680 and begun to trade impulsively higher.
US fundamentals supporting the recovery
Options trading activity might had been very high lately as the bulls were driving the index upward impulsively. It looks like optimism begins to rise again as economic activity in the US does not seem weak, with the latest GDP preliminary release point towards a 3.0% increase in the second quarter of this year.
Also, corporate gains had been strong, exceeding analysts’ expectations, support the Dow upward current long-term upward leg that begun after the election of Donald Trump as president.
So far the Index found resistance around 21920 area and options trading could be intense there since the area capped the upside on August 23rd as well. If the bulls will manage to overcome that obstacle, the price could continue head towards 22.080 figure, where selling activity might intensify again as the area had been the starting point for the previous bearish leg.
If 21920 will cap the upside, range trading will prevail and the price could head lower again towards 21680, where the bullish leg started.
Also, keep in mind that today and tomorrow there are some new economic indicators due to being released from the US, culminating with tomorrow’s Nonfarm Payrolls and Unemployment Rate, which, as usual will generate high amount of volatility.
The development of the current relation between the US and North Korea could also continue to have a huge impact on the Index price as selling activity intensified each time bad news came out.
To sum up, considering that the Index had been trading impulsively for a few months in a row, we expect buyers to treat every price deep as a new opportunity to get long so the upside trend should continue for the short-term horizon. So far, the Dow had been one of the best performing indexes and it should continue to be that way.
The financial industry developed tremendously in recent years due to the technological developments and alongside with that, new and more complex trading instruments had become available, not just for institutional investors but for ordinary people like yourself.
This material will focus on four advantages of binary options trading and show you what are the key reasons for why you could trade them.
Why is binary options trading so popular these days?
When it comes to these instruments, there are some key features that make them unique. The following traits are four of the most important ones that can make you decide to invest using binary options.
- Fixed risk- since you know from the start how much you can earn and how much you can lose you can develop a proper risk management model that can help you avoid blowing up your capital and manage to attain consistent results.
- Variety in terms of assets available for trading – with binary options trading you have the availability to trade a few thousands of instruments across different markets, allowing you to diversify your portfolio.
- Easy for beginners who just started trading – compared with other assets that are harder to understand when trading (like stocks, for example) trading binary options is easier since it does not require complex knowledge about the financial industry.
- Quick results – with an effective trading strategy and a well-designed risk management system + the discipline to apply diligently the rules that you’ve set up, you can acquire great results in a short period of time.
These are four of the advantages you can benefit from if you choose to trade binary options. However, we would like to emphasize again that trading is not easy, not matter in what market you are investing, so just because use have those advantages, that does not mean you don’t have to work hard in order to achieve great results.
In our next material we’ll focus on some of the disadvantages of binary options trading, so you will know what are the main risks if you choose to invest in this market.
For the last three days the US dollar had been under huge pressure, first, due to Jackson Hole Symposium, where Fed Chairman Janet Yellen hold a speech. The market turned bearish after her statement since she had not mentioned not a single word about the future developments of monetary policy. Not even her whole 16 pages statement, which was published after the speech, did not had any mention about it.
Dollar slumped as the market is not pricing in a smaller probability of a new rate hike from the Fed until the end of the year. Option trading activity had been intense for the last few days as volatility had been very high.
North Korea launches a new rocket
The second most important cause of recent dollar weakness is represented by the latest North Korean missile test, which is supposed to have reached Japan. As political tensions had risen again, safe haven currencies are the ones favored, since investors are running from risks assets and trying to find a safe placement for their money.
Looking at our chart above, you can see that the US dollar had been under huge pressure lately. Option trading activity on the downside might had been very intense lately, since the bearish leg that is still under development is the most impulsive one.
If the political tensions will continue to escalate further, the swiss franc might be favored for the short-term horizon. That is very likely to happen since the situation had been critical for a few months now.
Also, the current economic development from the US had pointed towards a slowdown. If you combine that with the lack of trust the market begins to have on Donald Trump’s campaign promises, you have an environment where the US dollar should perform very poorly.
Latest headlines point towards a new meeting of UN Council, scheduled for tomorrow, which could draw another sanctions against the regime in North Korea. Risk aversion should be low until this tense situation finds a solution.
Risk Warning and Disclaimer
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. No information or opinion contained on this site should be taken as a solicitation or offer to buy or sell any currency, equity or other financial instruments or services. Past performance is no indication or guarantee of future performance.
Since online trading had become so popular in recent years, more and more people without a previous economic or financial background had been drawn into this industry.
We want to focus particularly on binary options trading. For those of you who are not familiar with this topic, check out one of our previous articles to see the differences between binary options and forex.
Categories of trading strategies
There are two major types of strategies that beginners usually adopt when trading binary options:
- Betting type trading strategies – these strategies assume that the trader will try to apply in trading some betting strategies. One of the betting strategies that is usually chosen is martingale and we’ll talk about it in greater detail in a future material. Also, traders are using betting strategies combined with the economic calendar since they are trying to exploit the volatility that is generated around important events.
- Market behavior strategies – in these strategies, traders rely on technical and statistical data, trying to understand why a certain market behaves in a certain way and also understanding the order flow behind any particular move. These strategies take more time to master, but if you are willing to build a career out of online trading, these are the ones that professional use so you should use them as well.
Although betting type strategies can be effective, there are some negative aspects of them. Trading requires a certain degree of objectivity and by choosing a market behavior strategy you will be able to remove those subjective views over the market, since you’ll have a clear set of rules that will help you understand how the market is trading and when you should put on a trade.
Discipline is other important aspect, with regards to the implementation of a trading strategy, but we’ll cover that topic in detail in other material.
To sum up, we tried to show you what kind of trading strategies you can adopt of binary options trading and we suggested that market behavior strategies are more suitable if you want to trade in a professional way.