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.
Every trader should understand the difference between binary trading and forex trading since applying the same methodology in both cases can damage your capital.
What is binary trading?
It is very important to understand that binary options are contracts with fixes risks and fixed rewards. In this case, the trader must decide if a particular financial asset will go up or it will go down during a fix period of time. The trader knows from the start how much he can make if he is right and how much he can lose.
Risk management strategy should also be adapted to this circumstances as in case you are wrong and the price does not go in the direction you predicted you will lose all the money you’ve risked. What each trader should understand is that if you want to make money with binary trading in the long run, accuracy is very important, so your number of gains should be higher than your losses. Less than 50% accuracy means that you are mathematically going to blow up your entire account.
How is forex trading different?
The forex market is a more flexible environment since you can set by yourself the amount of risk that you take and also you can decide when to take profit. Since the ultimate risk and profit are unknown, forex trading carries higher risks as it is harder for any individual to predict exactly where the price is headed.
Another key difference is margin trading. In forex you can use leverage so you are able to trade larger volumes than your initial deposit, while in binary trading that tool is not available.
In terms of similarities, it is worth to mention that both binary options and forex trading are online investments opportunities, being available through a broker platform.
To sum up, both binary options and forex trading have strengths and weaknesses, but what any trader should understand is that you have to adapt your strategy to the environment that you trade. A strategy with very high accuracy is a must for binary trading while in terms of forex trading, an increased attention to a more complex risk management system is absolutely required.
The market is a community of people which interact on a day to day basis. The purpose of their interaction is to buy or sell financial assets in order to make a profit out of price differentials. What any beginning and experienced trader need to understand is that price do not move up and down just randomly or driven by a mysterious force (or an occult conspiracy). The people who sell drive the market down and the people who buy it lift it up. They make the decision to buy or sell based on the view that they over a particular market or equity or any other financial instrument.
What is the market sentiment?
The market sentiment is the overall view that its participants have over a given period of time. The market can’t be moved by a single individual, even though it had a vast sum of money, so the combined force of a certain percentage of market participants is the one that drives prices.
Understanding how the other market participants view a certain financial instrument is crucial when trading as it can enable you to anticipate future move and avoid being trapped in the wrong side of the market.
By developing skills that can help you examine and determine the market sentiment you will have a highly valuable tool for forex analysis or equity analysis etc.
There no use of having tons of knowledge about the markets, trading, risk management etc., if you are not able to apply that information in order to understand how the market works and make good trading decisions.
Since the market sentiment can help you determine the overall view of its participants focusing on learning how to read it is essential.
To sum up, market sentiment refers to the general view of the majority of a particular market and it also represent one of the key elements a trader should learn how to master, no matter what type of analysis you need(forex analysis or commodity analysis etc.). Learn how to read it and you would be one step ahead in your trading adventure.
Jan. 14, 2017 – News broke this week that the Banc De Binary (BDB) will be closing its doors for good. Since their inception, they have faced a constant array of issues including several lawsuits. Although they were one of the very first binary options brokers, their reputation has been taking hit after hit. It has reached a point where they felt it is no longer worth staying in business.
The company has been having difficulties dealing with the problems that they have been facing. The fines that they have been fighting are having a net negative impact on them. It has reached the point where the best option is to shut things down and move on.
One such lawsuit involved being fined by Cysec for €350.000. In another, BDB was forced to pay out $11 million in fines for taking in US customers, which was forbidden at the time. In addition to those fines, another significant hit came when the BDB’s founder was charged with $150,000 in fines. These fines quickly began to pile up and they push the broker past the tipping point.
One insider confirmed the motivation behind closing their doors. FinanceMagnates explained that the damage that the company was taking him is not worth the reputation that they had to carry around.
Since the announcement, BDB has ceased the acceptance of any new accounts. In the meantime, they are working to get the funds returned to all of their account holders. Returning all of the funds to their account holders will take a long time, but the expectations are that they will be able to recover and return all of the money that customers have put into their system.
This will have a significant impact on the binary options industry. BDB is a $500 million company and they are about to close their doors. Experts are concerned about the impact this will have throughout the world of binary options trading. In a place where consumers are skeptical of the nature of binary options trading, a firm this large closing like this will only lead to further skepticism.
If you are a customer of BDB, we would recommend that you login and try to withdraw your funds as soon as you can. Although we do not anticipate any of these account holders having a problem withdrawing your funds at any time, there have been cases where companies had trouble recouping all of the money that was deposited in through their accounts. It is better to err on the side of caution and withdrawal as soon as possible.
The impact of this will be felt for years to come. Although binary options trading is a perfectly legitimate way to invest and increase your income, people will look at things like this and hesitate the next time they are thinking about getting involved with this industry. It is a black eye on what is otherwise a perfectly legitimate form of investing.