Glossary Of Terms From The World Of Binary Options

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Glossary Of Terms From The World Of Binary Options

Submitting documents (identity verification)

In order to be able to withdraw money from your trading account, a commission CySEC that regulates all brokers (basically all brokers that can be found on our list of binary options brokers) requires documents confirming their identity.

The documents are following:

  • Picture of an ID
  • Picture of Gas, electricity, phone bill or a bank statement
  • Picture of the credit card (with your details covered)

This practise is quite common and there is no need to be afraid. The reason is that every trader needs to be 18 years or older and to make a deposit, a card with the same name needs to be used.

The picture of an invoice or a bank statement is required in order to confirm your address.

Financial Conduct Authority (Used to be called FSA) is a regulatory body that controls financial services in the UK and takes care of the stability of the financial sector as well as the customer’s safety.

Deposit bonuses

Bonus is the value that a trader can obtain extra to his first deposit. The greater the initial deposit, the bigger the bonus is offered by brokers. Bonuses differ from broker to broker, but most are between 20% – 100%. Every bonus has to be wagered in order to be withdrawn, so it’s basically NOT free money as some might think.

Bonus wagering

The word wager means “to make trades in value” and can be found in articles and terms and conditions about bonuses. When a brokers offer a bonus, you always have to make trades in x-times the value of the bonus in ordet to be able to withdraw it – wager.

Let’s say that a broker gives you a bonus, i.e.: $100 and if the wagering requirement is 30X, you have to place trades for at least $3000, in order to withdraw the bonus, but that’ll be quite easy with all our advice.

A pip

A pip is the smallest possible movement that an asset can make, whether it’s up or down. If the price of EUR/USD is 1.33610 and it changes to 1.33611, it means that it’s moved by 1 pip. However, not all assets have 5 decimals. For example USD/JPY usually has 2 decimals, so a movement of 0.01 would mean a change by1 pip.

In the case of binary options, all we need to know is that if the price, in the expiration time, is higher or lower by one single pip that you’ve predicted then the trade is considered successful or in-the-money. That’s all it takes for your trade to be profitable

Expiration time

Expiration time is a period or time at which the options expire or we evaluate whether the trade has been successful or in other words in-the-money. Expiration times usually range from 30 seconds to couple of hours, but some brokers offer trading for longer periods of time (ie. months).

The longer the expiration time, the easier we can predict the development of the market, however this rule usually applies to the expiration times under a week.

Strike price

Strike price(initial price, buying price, opening price) is the value of an asset (index, stock, commody or currency pair) at the beginning of the trade, just when the trade is opened. Expiration price is the opposite.

Forex

Forex is an abbreviation for Foreign Exchange. It’s a trade with foreign currencies, for example USD/EUR. Of course, there are many more, so it’s important with what trader you are collaborating, because not everyone offers all of them.

Brief history of Forex

Trade as such has been part of the mankind for a very long time. Before we started to use money as a currency, trading has been done in a form of an exchange, therefore trading goods directly. With the inventions of money as a currency there has also been a need to change different currencies – in the past, it has been precious metal(silver and gold) as a method for currency conversion. Since 1971, FOREX is used as a way of trading currency pairs.

Forex as such, is not an institution with a proper building like a classic stock market. It is “only” a worldwide connected computer web, where millions of traders can see a 24-hour course development of individual currency pairs.

A SCAM

We can consider a scam certain brokers that are not trustworthy and might cheat their customers, for example: zoomtrader. A scam can also be called a website that offer immense and absurd numbers, attracts you with super cars, houses and beautiful women. Yuck!

You can find some reviews of binary options scams on this website.

An asset

An Asset or an instrument is basically what we trade with – it can be gold, silver, Facebook stocks or currency pairs EUR/USD. Some brokers (Olymp Trade or IQ Option) offer more than 1000 assets to be traded.

Drawdown

In the world of trading, drawdown means the biggest decline of your capital. So, if you’ve made 100 trades for $10, out of which 80 finished in-money and the other 20 were somehow spread in the 80, the maximum drawdown will follow at the end of the largest series of lost trades, i.e.: if out of the 20, 6 were in a row, the maximum drawdown was $60.

The graph shows the sample amount of capital (vertical) to the number of months spent trading (horizontal). We can see that we, in the beginning, have suffered a 50% drawdown, from which we’ve recovered and at the end of the trade we’ve experienced another decline of 20%. Therefore the biggest decline was 25 000.

Breakeven ratio

Breakeven ratio is a percentage number that indicates how many trades are to be won in order to achieve long-term profit. With binary options brokers with a profit of 80% (average profit), it’s about 56% – this means that if your long-term profit of all your trades is going to be more then 56% with the same amount, you’ll be making a lot of money and losing none.

CySEC

CySec (Cyprus Securities and Exchange Commission) is a regulatory authority from Cyprus. It ensure that investment firms(brokers) adhere to strict laws and regulations.

CySEC duties include:

  1. Supervising and controlling licensed investment services companies
  2. Carrying out inspections over brokers and brokerage firms.
  3. Granting operational licences to investment firms

CySEC official website can be found here: CySEC.

Price action

Price action is a type of technical analysis and is based on the price movement. The difference between price action and technical analysis is that you don’t use any additional indicators when trading price actions. An example of price action trading is using trend lines or support and resistance trading.

Timeframe

Graph’s time frame; position traders will use, for example, day charts where one candle represents the change of a price in one day. This is called daily time frame.

Intra-day traders use an intra-day time frame, for example M15 (1 candle=15 minutes) or M5.

Binary Options Glossary

As the ease and simplicity of binary options trading become well known, it is attracting more traders. Though it is definitely easy and even a newcomer can quickly grasp the basic concepts, you need to be familiar with the key terms to carry on successful trading. For this, perusal of a Binary Options Glossary is a must before you actually invest your money and start to trade. You need to understand the implications of the technical terminology as well as the commonly used words to be able to operate freely in the world of binary option trading.

What you should know from Binary Options Glossary?

Here are some common terms of Binary Options Glossary which you should clearly know and understand before you can start trading:

  • A pair of most common terms in the Binary Options Glossary is the Call option and the Put option. If you think the value of the asset will fall, it is put option while if you think it will rise it is a Call option.
  • Another pair of terms of special importance to Binary Options Glossary is in the money and out of money. When you are making a profit, your trade is in the money. On the other hand, if you incur a loss, you are out of money.
  • Another term is American style option. It refers to an option which you have to exercise at any point of time before it reaches expiry.
  • Two terms often used to describe the state of the market are bearish and bullish. The former refer to a situation where the price of an asset is expected to decline. On the other hand, the latter refer to a situation where the price of an asset is expected to rise.
  • Closing a trade is vital for determining profit or loss. This refers to the process whereby an existing trade is ended.
  • You must have heard about day trade. This refers to trade in an asset which is opened and closed on the same day.
  • The most important term in a Binary Options Glossary is of course binary option, also known as digital options. It describes a trade where the trader gets to pick one out of two predictions. If he is correct, they earn a fixed amount while if they are incorrect, their loss is known beforehand.
  • When all the call options or all the put options underlying a trade are described together, it is called a class of options.

Read Binary Options Glossary before trading

As you learn more and more about binary options trading, it is likely that you will come across more terms. That is why; you should always have an access to a good Binary Options Glossary so that you can understand every situation and be able to make a profitable trade. Often, this Binary Options Glossary is provided by the broker that you choose if they have a high standard of customer support and user friendliness.

Binary Options Brokers – Glossary

Binary Options Brokers – Glossary of terms before trading with your broker

Here is a list of the most common trading terms used in the world of Binary Options and Forex Trading. While we don’t expect you to know every single one of them without stumbling right off the bat however, we do recommend giving this hand glossary a once over before reading any further.

It isn’t that we doubt your level of intelligence, but the world of finance, investment banking, and Forex Trading can be a little volatile. The market won’t wait for you to learn your terms, nor should it. This is serious business, and even if you don’t get good at trading Binary Options, well, at least you can sound like you know what you’re talking about.

Asset
An asset is the object of value of which you will be trading. This is more commonly known as stocks, commodities, etc.

At-The-Money
If an option’s Expiry Price is similar/identical to its original buying price, it is referred to as being At-The-Money. In this case, instead of making a profit or losing it all, traders will actually just receive the entirety of their original investment back. Essentially breaking even.

Binary Options
The exciting, risky method of Forex Trading in which one either makes a predetermined amount, or makes nothing at all.

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Call Option
This option provides a trader(s) with a concrete, predetermined profit so long as the underlying asset’s value is higher by its Expiry Time than it was at the moment of purchase. Most common form of Binary Option.

Current Price
Self-explanatory. This is the most recent value of an asset according to the most up-to-date data available.

Digital Options
Essentially just another name for Binary Options, once again playing off of the binary aspect of the trade.

Expiry Time
This is the lifespan of an option, or, more accurately, the last moment of its life. If an option has not reached the desired result by this time and date, it never will (as far as the current trade/option is concerned).

Fundamental Analysis
Very In-depth analysis in which every potential outside force is considered, and also determined as to how it/they may/will affect the value of an option.

In-The-Money
This is the ultimate goal every trader has for his/her option. When something is considered to be In-The-Money, it means that an option has reached (or exceeded) the desired Strike Price by its Expiry Time.

Out-of-The-Money
The not-as-desired outcome for an option. This refers to when an option’s value fails to reach the Strike Price by its Expiry Time.

Put Option
An option that favors Out-Of-The-Money results. Traders succeed when the underlying asset price is lower by its Expiry Time than the price at which it was originally purchased.

Range Option
A Range Option requires that traders predict whether or not an asset’s value will fall in or out of a particular, pre decided range come an option’s Expiry Time.

Strike Price
The target price. The goal. The price at which an asset must reach by its Expiry date, which determines whether an option ends in or out-of-the-money.

Technical Analysis
Speculative Analysis, mostly. Analysts look at an asset’s past trends in order to predict its further behaviors.

Touch Option
Very similar to a Call Option, a Touch Option asks that traders predict whether or not an asset will “touch” a predetermined Strike Price, only it must do so before its Expiry Time.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    1st Place! Best Binary Broker 2020!
    Best Choice for Beginners — Free Education + Free Demo Acc!
    Sign-up and Get Big Bonus:

  • Binomo
    Binomo

    2nd place! Good choice!

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