How to make Index Binary Options Trading profitable We know

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Index Binary Trading

As one of the investing terms, a stock index is a statistical measure of the changes in a portfolio of the stocks that shows a portion of the overall market. To make the term more explicit, the index is calculated from the prices of its component stocks, mostly as a weighted average. Therefore, trading indices enables traders to make use of so called knock-on effect. Indices are not available for 24-hour trading and also there is a need for an open stock market.

In our article we are going to explain indices in the light of binary options trading. So, let’s start!

Indexes – how do they work?

We would like to attract your attention to some of the index trading aspects that you could further utilize in your trading experience. To begin with, you have to carefully study the market history to pinpoint the direction according to which you should place the trades in the future. Additionally, do not miss any significant news releases and important events as they affect the price of both stocks and indices. Thereby, you will observe the reaction of the particular stock and the index to the change. It is advisable to consider every change to make wise investment decisions.

However, news might not necessarily affect the price of the stock and the index directly. What really represents a real impact is the traders’ reaction to the breaking news and how do they actually perceive the nature of the index or stock market.

Index Binary Options – Main tips

Firstly, it is important to define the indices you are going to trade on. Basically, you are given the choice of the most popular indices. Let’s take a look at them below:

It is highly recommended to trade Index Binary Options that you can predict their movements. The past market data can come handy if you need to choose the best index to trade.

Secondly, you should know precisely when you are allowed to trade. As we have specified above, index trading is not available 24/7. It is known that stock exchanges open in the mornings and close in the afternoons. Thus, you need to determine the trading hours for each index you are interested in and also know the trading time of the parent exchange of this index.

How to start binary options trading: a step-by-step guide

Do you need a simple guide to start trading and investing in financial assets? Do you consider binary options? It is a fast and extremely simple financial instrument that allows investors to speculate on whether the price goes up or down in the future. You can trade stock price of Google, Bitcoin, the USD/GBP exchange rate, or the price of oil, silver and gold. The time span can be as little as 60 seconds, making it possible to trade hundreds of times per day across any global market.

As a beginner you can find a trading platform and register an account. Trading is not gambling. To start trading you need to learn more about binary options trading, profitable strategies, indicators, trends, economic index and exchanges. It can be complicated and overwhelming.

Read a step-by-step guide from the experienced trader to learn more about binary options. Education and training will help you to become successful. Also before trading real money you should take advantage of a demo trading account and test your strategies.

Step 1. Learn terminology

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You definitely need training. For example, here’s some specific terminology wrapped with binary options. Can you sell an option? No, but you can buy a “put” option. In order to understand what binary options trading are and how to make money, you need to learn the basics. You need to know the answer to the following questions:

  1. What is the electronic contract market? What is being traded here? How is the price formed? Where does the profit come from?
  2. Fundamental analysis. How economic indicators affect financial markets? How to track the situation on the market?
  3. Technical analysis. What is a trend? What indicators are important? How to determine the direction of the price?
  4. Trading terminal. Brokers trade in their accounts on the own trading platform. The platform at Pocket Option has an intuitive interface and a complete set of tools t you start trading.

Step 2. Risk Management

Trading binary options has an element of risk involved. You could lose all or most of your money in an instant if you are careless or greedy. As such, the concept of risk management is one that every binary options trader should take very seriously. Calculating your risk in binary options is actually very easy. Binary options brokers have made this very easy, because the moment a trader pushes the button to purchase a contract, the trader is immediately shown the cost of purchasing that contract. He cannot lose more than what he spent purchasing the binary options contract, so for every contract purchased, the amount at risk is known and the potential reward is also known. This enables the trader to do what is necessary in order to keep his risk within acceptable limits.

Step 3. Trading strategy

The basic requirement is to predict the direction in which the price of an asset will take. The price will either increase (call) or fall (put).

Successful binary options traders often gain great success utilizing simple methods and strategies. It is very important though, to understand which strategy to use in each situation and in every event, you should have a well thought out strategy for every market condition. Whatever indicators you are using to signal moves, or lack of moves, in the market now, are the same you would use for binary options. Additionally, as with any type of trading, even before having a sound strategy, you need to employ sensible money management. Start with 2-3 indicators and read more tips on the strategy: you strategy is good if you have profit/loss ratio is at least 70/30.

Step 4. Trading psychology

Trading real money is tough. It can be exciting and depressing at the same time. Discipline and risk-taking are two of the most critical aspects of trading psychology, since a trader’s implementation of these aspects is critical to the success of his or her trading plan. Under pressure new traders start to panic and make mistakes, deviating from the chosen strategy. Therefore, it is recommended to start with a minimum deposit and work on small stakes. Finally, you need to read a lot on how to become cool and composed. It will help you accept the risk involved in trading. As a result, you will always enter trades in a disciplined way.

Step 5. Trading system

The overall trading system includes all of the above. You need a set of rules to follow while trading. The components of your strategy include strategy, money management, psychology, trading schedule and potential financial goals.

As a last word of wisdom to the new traders, do not forget that we every successful trader finds his or her trading style and risk tolerance. As long as you can learn from your mistakes, you can become successful.

A Guide to Trading Binary Options in the U.S.

Binary options are financial options that come with one of two payoff options: a fixed amount or nothing at all. That’s why they’re called binary options—because there is no other settlement possible. The premise behind a binary option is a simple yes or no proposition: Will an underlying asset be above a certain price at a certain time?

Traders place trades based on whether they believe the answer is yes or no, making it one of the simplest financial assets to trade. This simplicity has resulted in broad appeal among traders and newcomers to the financial markets. As simple as it may seem, traders should fully understand how binary options work, what markets and time frames they can trade with binary options, advantages, and disadvantages of these products, and which companies are legally authorized to provide binary options to U.S. residents.

Binary options traded outside the U.S. are typically structured differently than binaries available on U.S. exchanges. When considering speculating or hedging, binary options are an alternative—but only if the trader fully understands the two potential outcomes of these exotic options.

Now that you know some of the basics, read on to find out more about binary options, how they operate, and how you can trade them in the United States.

U.S. Binary Options Explained

Binary options provide a way to trade markets with capped risk and capped profit potential, based on a yes or no proposition.

Let’s take the following question as an example: Will the price of gold be above $1,250 at 1:30 p.m. today?

If you believe it will be, you buy the binary option. If you think gold will be below $1,250 at 1:30 p.m., then you sell this binary option. The price of a binary option is always between $0 and $100, and just like other financial markets, there is a bid and ask price.

The above binary may be trading at $42.50 (bid) and $44.50 (offer) at 1 p.m. If you buy the binary option right then, you will pay $44.50. If you decide to sell right then, you’ll sell at $42.50.

Let’s assume you decide to buy at $44.50. If at 1:30 p.m. the price of gold is above $1,250, your option expires and it becomes worth $100. You make a profit of $100—$44.50 = $55.50 (minus fees). This is called being in the money. But if the price of gold is below $1,250 at 1:30 p.m., the option expires at $0. Therefore you lose the $44.50 invested. This called out of the money.

The bid and offer fluctuate until the option expires. You can close your position at any time before expiry to lock in a profit or a reduce a loss, compared to letting it expire out of the money.

A Zero-Sum Game

Eventually, every option settles at $100 or $0—$100 if the binary option proposition is true and $0 if it turns out to be false. Thus, each binary option has a total value potential of $100, and it is a zero-sum game—what you make, someone else loses, and what you lose, someone else makes.

Each trader must put up the capital for their side of the trade. In the examples above, you purchased an option at $44.50, and someone sold you that option. Your maximum risk is $44.50 if the option settles at $0, and so the trade costs you $44.50. The person who sold to you has a maximum risk of $55.50 if the option settles at $100—$100 – $44.50 = $55.50.

A trader may purchase multiple contracts if desired. Here’s another example:

  • NASDAQ US Tech 100 index > $3,784 (11 a.m.).

The current bid and offer are $74.00 and $80.00, respectively. If you think the index will be above $3,784 at 11 a.m., you buy the binary option at $80, or place a bid at a lower price and hope someone sells to you at that price. If you think the index will be below $3,784 at that time, you sell at $74.00, or place an offer above that price and hope someone buys it from you.

You decide to sell at $74.00, believing the index is going to fall below $3,784 (called the strike price) by 11 a.m. And if you really like the trade, you can sell (or buy) multiple contracts.

Figure 1 shows a trade to sell five contracts (size) at $74.00. The Nadex platform automatically calculates your maximum loss and gain when you create an order, called a ticket.

Nadex Trade Ticket with Max Profit and Max Loss (Figure 1)

Best Binary Options Brokers 2020:
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    Binarium

    1st Place! Best Binary Broker 2020!
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    Binomo

    2nd place! Good choice!

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