Binary Options is often in the news, and quite often not for the right reasons. You’ll often come across articles referring to how Mrs. Smith lost her life savings to a new online fad. It has to be said, Binary Options might be exploding in popularity, but it is no fad. This trading type has been around at least since 1973. That was when the first binary contracts were introduced to the Over-the-Counter (OTC) market. Back then they were only traded by institutional traders, often as a hedging tool, ie. used to mitigate their risk. Then in 2008 everything changed and the gateways were officially opened by the SEC, so that anyone could begin trading these high yield options. The rest as they say is history.
In the last decade the industry has seen literally hundreds of brokers popping up all over the internet. In that time many of the more unscrupulous brokers have closed down. The last few years has been an especially interesting time for the industry as the regulatory environment across the globe has evolved with the majority of the local regulators choosing to regulate binaries as a financial product rather than a gambling product.
Bring back Mrs Smith for a moment who claims to have lost her savings. So what happened here? Well, the interesting thing and the reason binaries are just so popular is that they are so simple to grasp. From the time you open an account to the time you place your first trade can literally be a couple of minutes. For the uninitiated binary options trading becomes somewhat of a gamble, just like in the game of roulette. Will the asset go up or down by expiry? You have two options here and you can quite easily just make a guess. This is definitely a gamble. If though you become educated and informed on what’s happening in the markets and with each asset, plus if you start incorporating strategies into your trades, a gamble quickly evolves into a skilled trade. So that’s probably what first went wrong for Mrs. Smith. Secondly some of the more unscrupulous brokers make promises that they just can’t keep. They probably convinced Mrs. Smith to just keep depositing, even though she was losing. A toughening in the stance of the regulators has stopped a lot of this coercion happening.
So what do you need to change a gamble into a trade?
If you’re keen on actually taking a trading edge over the markets, then it’s time to get educated. Here’s the tools you’ll need:
- An economic calendar – an economic calendar is a list of all the economic events, like the data announcements that are coming up over the next few weeks or months. These events or data releases can quite literally move markets. For instance if you’re looking at the Fed meeting, depending on the outcome of that meeting, the USD will move up or down in price. If there is an interest rate meeting in the Central Bank of Europe, this will almost certainly have an impact on the euro. The economic calendar usually shows you the events time and date, and also how strong an impact it will have on a certain currency. The economic calendar is commonly used by Forex traders, but is also just as useful to binary traders.
- Follow the news– you can specialize in one or a few different assets rather than trading the scope. For instance let’s say you find news on Apple interesting, you can trade them. But first you need to read as much as you can about the company in the latest news and if you really want to master the art of trading the Apple stock, read information on their Annual General Meeting (AGM) and other reports they release. When they release their earnings reports for instance, if the results are better than expected, this can move the Apple stock price. Another example, if you like the idea of trading oil prices, then read up on the oil manufacturing news and also learn about the inventory levels of oil
- Technical Analysis – it might seem quite daunting at first, but there is a good reason many experienced traders use this type of analysis in their trading strategy. Technical analysis is usually in the form of charts or lists of numbers. These represent past data from which can be gleaned trends. Once you are able to spot a trend, you can project it in to the future to help you decide where the asset price will move. History is always repeating itself, so certain factors like geopolitical incidents which affect the price of an asset, will usually always have the same effect on the price. Most brokers will provide daily technical analysis as well as market news and an economic calendar on their website, if not on their platform.
- Trading Strategies – Implementing your own trading strategies onto charts is an excellent way to spot trends and find trading opportunities. The best way to do this is to keep a free charting package open on your screen. Plenty of websites offer this kind of free service. Alternatively you can download a trial version of the MT4 platform from a forex broker, this is free and will show you all the rates plus allow you to overlay indicators onto the charts. Start with the simple ones like the trend lines and the support and resistance levels and you can develop your skills from there.
- Free Support Tools – The latest trend to hit the market is the copytrader and robot technology. These are both really good ways to get some action in the markets without actually having to know anything. A copytrade service allows you to piggyback off of other more experienced traders. It’s a way to use the wisdom of the crowd to help your own bottom line. With a service like this, you choose from the available trade leaders, based off of their success levels and risk appetites. Once you find one that matches your objectives, simply click “follow”.
Binary robot technology is also a very popular way to enhance your trading. A robot is an algorithm (a piece of code) that monitors and tracks the markets to find good trading opportunities, it then places the trades on your behalf. You can stop a robot at any time you wish. Just be advised there’s a lot of scam robots out there, so try the free trial or read our reviews before you actually deposit money.
Alternatively you can subscribe to trade signal services. In this way you’ll be sent trading alerts to your email, phone or through Skype. This is great for traders that do want to trade for themselves but could use the help of trade alerts to suggest some trading opportunities. It’s also a good way to learn to trade the markets.
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