Learn Binary Options

AUD/USD:

The AUD continues its recent retrace.  Many traders use different time frames for different currency pairs.  The longer the time frame the more valid the pattern you are charting is.  Moving Averages are basic tool that even the most sophisticated trader needs to always be cognizant of.  The markets tend follow the moving averages generated off of the daily charts.

In Chart below I use a moving average from an 8 hour chart.  I strongly encourage traders to be vigilant of at least checking a weekly, daily, 8 and or 4 hour chart and then any time frame less than 4 hours that you may want to look at.

You can see that the yellow line representing the SMA 50 was breeched and prices continued a steady fall (The Red line is the 100 SMA).  There are also a number of near candle formations that support this price depreciation.

Circled in blue is a near Falling Three Candle pattern.  Typically you have a red candle followed by 3 or so small green candles that are contained by the original red candle.  Following the last green candle is another red candle with price closing below the original red.  The Falling Three pattern is nearly followed by Three Black Crows.  This candle pattern forms when you have the candles each open in the midsection of the proceeding candle but also close lower than the proceeding candle.  This pattern nearly forms between the 2 white lines.

GBP/USD:

This pair has been range bound since May.  When a pair trades in a range, price is confined to a narrow margin of highs and lows.  In the Chart below the 2 red lines represent the range support and resistance lines.

The 2 red boxes indicate when minor breakouts have occurred.  The tops and bottoms of the boxes would be your absolute stops depending on the handle you entered the trade at.  Another point of consideration is the 50 SMA and 100 SMA.  You can see that the SMA’s are also moving sideways.  Price typically pops when it passes above/below a significant SMA.  With SMA moving into a sideways march we are approaching congestion on this pair and that should signal another breakout.  Obviously if the dollar continues to strengthen as it has GBP should be headed south.

USD/CAD:

We have noted several times a formation we refer to as a Step pattern.  More commonly this is identified by Lower Lows and Lower Highs and vice versa.  We picked up on this pattern emerging on a 4 hours chart.  We identified the possible start of this pattern shortly after the BOC  publicly declared it’s sentiment for a “weak Canadian Dollar”.  We assured you that there would still be time to catch this move even if you could not trade the actual news.

We suggested that you wait for the Step to appear and buy on the dip which was a confirmation of our pattern formation. On the graph that it is depicted near the 3 and a yellow circle. The exit for taking PNL we had at 1.0660 a prior support resistance point.

EUR/USD:

The Squeeze Play.  We talked about this move where we are seemingly forced into a breakout.  In one of our earlier pieces we mentioned that our experience told us not to bet on the Squeeze Play, meaning trade against the direction of the existing trend.  I must admit we got carried away by the hoopla of crossing 1.50.

So the question you all should pose” is why in this case do you bet against the trend when one of the number one rules of technicians is never bet against the trend”.  The answer is based on the number two rule of technicians and that is; trade for the outcome that has the highest statistical probability of occurring.  To explain this further lets pose a question.  Why didn’t the market make this move a while ago similar to the recent strong moves in CHF  & AUD?

The answer is the Strength of the move was deteriorating in advance of 1.50.  Every trader had their   eye on  1.50, but obviously no one was a real buyer (for now) otherwise at 1.4830 when momentum started to stall we would have had traders continuing to bid up the EUR.  Lastly, when price action was negligible on the big cross of 1.50 that should have been another tip that there were no big orders lined up to continue buying north of 1.50.

We added  a MACD to indicate when the momentum started to wane. There are number of overbought tools on your platforms that you can use, from Stochastics and Oscillators to something as simple as the RSI.

Options trading is a very profitable investment for traders who know how to do it well. It takes a lot of attention and dedication for one to register success. Good trading strategies and a good sense of judgment are just but a few of the ingredients needed to succeed in options trading. The following are some tips that you can use in order to be successful in options trading.

 Demo Accounts

 Before getting into the real options trading, it is always a good idea to use a demo practice account where you will get to learn more about the trade and the strategies to make in order to improve your success on the options trading. A demo account simulates the real options trading platform and it is a good source of experience before entering into the real trade. Once you are in the options trade, it is also a good idea to use good options trading software that will make your trade more efficient and also guarantee that you get all the latest information from the market.

 Risk limits

 Another way that you can improve your odds in options trading is by setting a risk limit over which you will not be willing to trade. Regardless of the type of options that you are trading in, you will need to set a maximum amount of risk that you will not allow yourself to go beyond. It is advisable that you trade on an amount that you can afford loosing and anything more than that should be rejected so as to reduce your chances of making huge losses in options trading.  It is important to note that however lucrative a deal seams, you cannot be 100% guaranteed that you will make a profit.

 Good trading strategies

 It is also good to develop good trading strategies that will help you in regulating your trade and also increasing your profitability in options trading. There are many good strategies that you can apply in your trade to make it successful and also give yourself an edge over other people in the same business. Setting goals and ambitions in options trading will also improve your profitability since you will be in a position to determine what you want and hence strive to reach for it.

 Conduct research

 Conducting thorough research on the market will also increase your prospects of success on options trading. You should avail yourself with knowledge on the movements that the financial market makes and the factors that lead to some occurrences. This information will help you in options trading since it will equip you with a good sense of judgment which will enable you to make the right decisions always.

 Use sophisticated tools

 The use of sophisticated tools such as computer applications and trading platforms is a good way of increasing profitability in options trading. New technologies are designed to make options trading much easier and faster and this is able to improve your chances of earning large profits. The use of digital options trading platforms is also a good way of reducing spending since you will reduce calling cost sand the cost of paying people to be on the options trading market floors.

Cash or nothing binary option is a way of rewarding any trader who has predicted the direction of the value of the underlying asset successfully. This is one of the two major subdivisions or classifications of binary options trading, the other being asset or nothing binary options. These two methods have gained popularity over traditional options over the past few years, mostly because of their common advantages that are; there is minimal risk, one can always sell the option when he/she suspects it will close out-of-the-money, etc

When using cash or nothing binary options, the trader gets a fixed amount of cash which is a pre-determined amount when the trade closes in-the-money on the pre-determined date and he/she gets almost nothing when the trade closes out-of-the-money. An example of cash or nothing binary options trade is a trader with an option whose underlying asset is valued at $5000 and a predetermined payoff of $7500. If at the maturity date the value of the underlying asset is anything, even a cent, over $5000, it is said to be in-the-money and the trader will get the $7500. If the value of the underlying asset is anything below $5000, it is said to be out-of-the-money and the trader will not get anything substantial.

From this, it is clear that the cash or nothing binary options is based on the European style binary options – in both cases, the price of the underlying asset determines whether the trader gets paid or loses everything. It is important to note that a trader can sell the binary option if he/she suspects it will close out-of-the-money or for any other reason. However, in such a case, the trader will only get a fraction of what he/she would have got if it ended in-the-money. Another important thing to note about cash or nothing binary options is that even if the trade ends out-of-the-money, the trader still gets some money which is 15% of the initial investment. This is one of the greatest advantages of binary options trade.

The major difference between cash or nothing binary options and asset or nothing binary options is that while the payoff in cash or nothing binary options is the predetermined amount, the payoff in the asset or nothing binary options, as the name suggests, is the underlying asset or an amount equivalent to the value of the underlying asset. With asset or nothing binary options, the trader gets the asset in full whenever the trade closes in-the-money and he/she gets 15% whenever the trade closes out-of-the-money, just like with cash or nothing binary options.

The two alternatives have no technical differences because the evaluation criteria to determine whether a trade closes in-the-money or out-of-the-money are the same and parameters such as the contract price, the strike price and the expiration date are the same. Having said this, data suggests that cash or nothing binary options are more popular, but there is no explanation to explain this – only speculations can be made such as it is because cash or nothing binary options are better known.

Many people believe that binary options trading is easy because all that a binary options trader has to do is predict correctly the direction of the value of the underlying asset –binary option trades are not as speculative as trades in other options. However, to be successful in binary options trading, there is need to understand the factors determining the value of the option. This is important because trading in binary options is all about predicting the fluctuations and the direction of the underlying asset.

The value of the option is mainly determined by the time value of the option and the intrinsic value of the option, but also the value of the underlying asset in some cases. The intrinsic value of the option means the amount of money by which the strike price would be above the pre-determined amount if the buyer were to exercise his/her option. The intrinsic value of the option is either calls option intrinsic value which is when the value of the underlying asset is greater than the strike price of the call, or put option intrinsic value which is whenever the strike price of the put is greater than the value of the underlying asset. It is important to note that trades out-of-the-money or at the exact value of the underlying asset do not have an intrinsic value.

On the other hand, the time value is the amount of money by which the value of the option is over the intrinsic value, but only before the pre-determined expiration date. In other words, the time value is the difference between the amount of money the buyer is willing and able to pay for the binary option and the intrinsic value of the option. Note that the longer the time to the expiration date, the greater the chance of a digital option trade to close in positive territory. Because options decay exponentially based on the rule of time component, we see that most options lose up to 1/3 of their value in the first half within the expiration time and lose 2/3 within the other half. However, this rule is not written in stone and there are fluctuations even in binary option trades that obey this rule.

The factors that influence the time and the intrinsic value of the option are the strike price, the price of the underlying asset, the expiration date and the volatility. The strike price is the major determinant of whether the option will have an intrinsic value. This can be interpreted to mean the more the binary option is in-the-money, the higher the price of the option, and vice versa. The effect of the underlying asset can be interpreted to mean when the price of the underlying asset increases, the value of the put option decreases and the value of a call option increases.

The expiration time affects the time value of the option in that it decreases this time value as the expiration date nears. Finally, the volatility of the underlying asset affects the direction of the value of the underlying asset in that the higher the volatility, the greater the fluctuations.

Binary option trading is when a binary options trader buys an underlying asset at a pre-determined price that expires at a pre-determined date and that has a pre-determined payoff. Some important things to note about binary options trading is that the trader does not buy the underlying asset itself, the underlying asset can be anything, even an event, a trader can exit a binary options trade before the expiration date when he/she suspects it might close out-of-the-money and a contract has to be signed detailing the specifics of the trade. As the name implies, there are two possible outcomes. When the binary options trade closes in-the-money, the binary options trader gets the full pre-determined amount, which is usually 65-75% of the value of the underlying asset and when the binary options trade closes out-of-the-money, the trader gets only 15% of the value of the underlying asset. 

To get started with binary options trading, a trader must understand the basics. There are three aspects of binary options trade and these are the underlying asset, the expiry date or time and the direction the value of the underlying asset will move in. The underlying asset could be a commodity such as Gold, a stock in a company, an index such as the FTSE 100, or an event such as probability of rain. The expiration time is determined by the seller and the buyer and it could be hourly, daily, weekly or monthly. The direction in which the value of the underlying asset closes can either be a call option, when it closes even a cent above the value of the underlying asset, or a put option, when it closes below this value. This flexibility makes binary options trading very attractive to traders. Another thing that attracts traders is the ease of use, the fact that one can exit the trade before the expiration date, the fact that there is a payoff even if the binary options trade closes-out-of-the-money and the fact that savvy traders will always make money.

When starting binary options trading, a binary options trader must understand the various options available. Most novice traders choose online trading platforms that are available for private and institutional investors – these are completely web-bases, meaning there is no need to download the software. Another option is software that serves the same purpose as the online trading platforms. These options help the binary options trader in analysis and in other functions. However, these options have to be customized to meet the specific needs of the user. Another option is using the services of brokers. Brokers have the advantage of having theoretical knowledge and practical knowledge of binary options trading.

When using online trading platforms, all that is required is an account with the service provider, a deposit following a simple process, choosing the market to invest in, choosing the underlying asset to purchase and then following up on the trade. With brokers, the binary options trader can opt for advice or consultations with the brokers or he/she can entrust his/her portfolio on the brokerage firm.

Trading in binary options is easier than trading in traditional options because of a number of reasons. All that a binary options trader is to accurately predict the direction of the value of the underlying asset and he/she will get the full pre-determined amount. The binary options trader gets to choose the underlying asset to invest in, meaning he/she will choose whatever he/she has done research on and is comfortable with. Another reason trading in binary options is easier than trading in traditional options is that one can get out of the trade even before the expiration date if he/she suspects the binary options trade may close out-of-the-money. When trading in binary options, a trader can have support from online trading platforms, from downloadable software and/or from brokerage houses.
However, even with the ease of trading in binary options, there are some things that a novice binary options trader must consider and take care of if he/she is to be successful. Although trading in binary options has many advantages compared to the disadvantages, the binary options trader must be aware of these disadvantages to be on the safe side. Traders must be aware that settlement indices are used to determine whether the binary options trade closes in-the-money or not and this can be confusing if not knowledgeable in the subject. Since trading in binary options has not been going on for long, there is no sufficient information on the same, either online or offline, and sometimes traders have to learn while in the trade.

For a novice binary options trader to succeed in binary options trading, he/she must do sufficient research. The information can be gotten from offline publications or online publications. Online sources are better because they are more convenient because you can access the information in any place and at any time, they are cheaper because websites giving such information are in competition and so they have to lower their prices to attract new clients and to retain old ones and because a trader gets to choose from different companies and the source guarantees your anonymity in case you do not want people to know what you are involved in for whichever reason. There are also courses available online, but the best thing is for a trader to ask for help from experienced traders and brokerage houses since they have years of experience and relevant theoretical knowledge.

For success in binary options trading, a novice binary options trader must familiarize him/herself with digital options trading terms. These include terms like calls, short and long calls, short and long puts, in-the-money, out-of-the-money, etc. Failure to do this means the trader will make mistakes in the trade.

The novice binary options trader must always stay informed. This should be before and after the trade. Staying informed means knowing about new developments. This knowledge is important because it will help the trader know how the price of the underlying asset may be influenced and so he/she can decide to hold on to the option until the expiration date or sell the option beforehand if he/she suspects it might close out-of-the-money.

Binary or digital options are new options based on the European options and they are attracting a lot of interest from investors. This is mainly because of their advantages over traditional options such as trade in foreign currency or trade in stocks. However, it is important that the binary options trader does not enter into the trade too hastily because like anything else in life, the trade has its merits and demerits.

 
The merits

 
The merits of trading in binary options greatly outweigh the demerits. The greatest merit is the fact that trading in binary options is easier than trading in other options, meaning anybody, even those who are not trained in the field, can make a profit comfortably. Trading in binary options involves getting about 75% of the value of the underlying asset whenever a trade closes in-the-money and getting about 15% of the value of the underlying asset whenever a trade closes out-of-the-money. All that a binary options trader needs to do is to determine the direction of the value of the underlying asset and since with a little knowledge of the underlying asset this is very possible.

 
When trading in binary options, a trader gets to choose the underlying asset of choice. The underlying asset can be anything from a commodity such as oil or coffee, the direction of the direction of an index such as the FTSE 100, the direction of a stock in a company, the probability of a certain event happening, etc. The fact that you have a choice is advantageous because you get to invest in something you have done research on and found to be worthy of your investment.

 
It is possible to use trading in binary options as a way of hedging funds. This is very important because many people have lost money over the past few years through traditional hedge funds. Hedging with binary options is very easy and individuals and/or organizations will be assured that their money is safe since there are tight regulations by the relevant government agencies and industry regulators.
 

There is support available for traders such as online trading platforms and downloadable software that assist the binary options trader in doing analysis. A binary options trader can also get the services of brokers who have years of experience and theoretical knowledge.

 
A binary options trader gets a lot of experience when he/she trades in binary options. Since trading in binary options is very similar to trading in other options with lower risks and since a trader gets to trade in different markets, this is a good way for a trader to practice.

 
The demerits

 
Settlement indices are used to determine whether a trade closes in-the-money or out-of-the-money. This can be confusing to a novice binary options trader. Another disadvantage is that small traders have to pay commissions that leave them with very little – only big traders get good returns. Finally, there is lack of sufficient information on trading in binary options, mostly because this trade has not been in existence for long.

Just as the name suggests, binary options simply mean two choices. In the financial world, binary options refers to a trading transaction which has two definite out comes. In binary trading options, a trader chooses his or her trading volumes by placing a fixed amount on the bet; this means that in case of a loss, the trader gets cushioning against losing more than his budget can accommodate. The loss is usually restricted to the amount declared only

In actual binaries trading practice, if a trader makes a binary call option on a company’s stock striking at $100, then on reaching the selected maturity date, the stock in question is trading at $100 and above, the trader will automatically receive $1000.  Likewise, if the stock in question is trading below the $100 mark at the time of maturity, then the $100 is lost. It is in this respect that people refer to binary trading options as the all or nothing option. This terminology is clearly descriptive of the nature of binaries trading because there is no half way about the profit margins; you either win every thing or loose every thing.

To comprehend the goings on in binary trading options, it is quite essential to know the terms and conditions governing this trading activity. Online binary trading requires a swift and smart sense of judgment. This clear sense of judgment can only be possible to one who is quite familiar with the economic trends in the stocks market. It is through the possession of such knowledge that one can be in a position to make smart judgments that also translate into profits.

It is of great importance to be able to translate the market indicators in a very curate manner since these indicators dictate the viability of your options trading. Since this is usually a game involving timely action, it is better to do binary trade in real time for best results. As the stock approaches its maturity, a decision delayed by five minutes may draw the line between a loss and a gain. When trading in online binary options.

 The difference between digital trading option and the traditional binary trading option is the fact that online digital binary trading option depends on the asset’s performance without having to buy the asset. Unlike in the traditional stocks trade where you buy shares in an asset and let them grow to maturity upon which you get to receive your dividends, digital options rely on the growth or loss rate to determine the profits gained or losses made in a particular bid.

Binary trading is proving to be a more reasonable form of game for people who like trading in shares simply because it has favorable options that can allow you to dispose off or purchase stocks according to your wish. The main advantage is the ability to determine your maximum, acceptable loss incase figures do not work in your favor. Options trading also let you decide the period within which you want to play.