Put and Call Options
Binary options trading is not the same as trading on the stock market. The stock market requires a significant amount of capital and knowledge of shares and the economic factors which influence them. Binary options trading focuses on whether the price of a given asset will rise or fall. Your trade is based on these simple terms and there is no middle ground. If you place a trade that the asset will rise to a specific price you will get an agreed return if the asset does. If it does not, you get nothing! The major advantages in trading this way is that trading can be started by anyone, you need very little capital. You will also know how much you could gain, or lose on every trade before you commit to it.
Put and Call Options - Analysis
Put and call options - what will be your choice? It is essential to complete as much analysis of your chosen asset as possible; this will help you to win more trades than you lose. A call option is placed if you believe the asset will increase in value whilst a put option indicates a decrease in value. Your analysis should help you to choose a price that you believe your asset will either rise to or fall to. This is known as the strike price. For your to gain a return on your investment the asset must be above a call strike price, or below a put strike price at the expiry time of your trade. As you will be able to appreciate, binary options are becoming extremely popular as anyone can start trading, but accurate analysis is essential!
The importance of analyzing and assessing an asset before you make a trade cannot be overstated. To be a successful trader it is an essential part of your trading strategy. Looking at asset reports, market analysis and the history of an asset is known as technical or statistical analysis. It is this approach which will help you to identify a trend in the movement of an asset and provide you with the best time to enter a trade and in which direction you should expect your trade to love in. Without this skill you will be limited to the assets which are clearly moving in one direction and your returns will be limited.
Put and Call Options - Time Factor
One of the most important factors of any binary options trade is timing and the length of your trade. Short trades need to be placed after looking at the most recent movements; it is likely that the asset will continue moving in the same direction as it has been. However, if you are looking to trade for longer periods of time you will need to understand the reasons why an asset performing as it does; this will help you to understand what it is likely to do next. It is possible for any asset to do better or worse than you expect and than its history suggests but this is not a common occurrence and is part of the risk of trading in binary options. Most assets stay within their historic boundaries.
Should an asset get close to a statistical boundary or cross it then it is highly likely that a correction will occur shortly afterwards. In these instances you need to be ready to put a trade which goes against the current price movement. Alternatively you may wish to place a trade which puts it outside of its normal boundaries; assuming there is a significant market factor which makes you believe this will happen.
Providing you do your analysis and avoid completing a trade simply on intuition you should have more successful trades than unsuccessful ones.