Stocks binary options are an asset class of binary options contracts that showcase the different equities listed on stock exchanges all over the world. Generally speaking, the fact that hundreds of stocks are listed on any typical national exchange means that stocks constitute the largest class of any assets listed on investment option platforms. In terms of pair options (that is binary options that compare performance of assets listed in pairs), stocks are usually the most used asset in this type of binary option.
The stocks listed as binary options stocks usually come from a careful selection of liquid and the most traded stocks featured on the national exchanges from America, Europe, Asia and the Middle East. Of all these nationally listed stocks, the stocks listed on the US stock markets happen to be the most popular. This is because many foreign companies list their equities on the US stock markets, and so this gives the asset base on the US stock markets numerical superiority over most other national stock exchanges.
Different prediction options brokers will decide which of the binary options stocks will be listed on their platforms. Typically, brokers that have their operational offices in a particular region will most likely list binary options stocks from exchanges located in their regions. Therefore, you will most likely find European stocks listed on the platforms of a binary options broker that is located in Europe. The same goes for American-style prediction options. Cantor Exchange and NADEX will mostly feature US equities as stocks binary options. An Australian broker will list more of the stocks assets that are found on the Australian Stock Exchange (ASX200), the All Straits Index in Singapore, or Japanese stocks listed on the Nikkei 225.
Brokers have a geographical spread, and some brokers will prefer to list more stocks from one exchange or one region than others from another region. Some option brokers such as AnyOption actually list equities from several regions liberally. With such a wide spectrum of equities to choose from, traders could get overwhelmed when it comes to trading choices.
Differences in Trading Stocks Binary Options & Stocks
What is the relationship between binary options and stocks? Are binary options legal ways of trading stocks? For those who love to trade stocks, trading binary options stocks assets presents an alternative way to trade. The manner in which returns on investment are earned in the stock market differs from that of the binary options market. The trade types are different. Some investment option platforms will even offer the ladder option, which is quite different from the Up/Down options that many are used to. Therefore, the trader must make adjustments to the trade strategy in order to make successful market predictions.
What are the key differences between trading stocks binary options and trading stocks in the conventional stock exchanges?
- Stock markets can be traded on margin. In the stock market, you can borrow from your broker to trade larger positions. You will not have such privileges in the binary options market, as the binary options market is an unleveraged market.
- In the stock market, returns on investment are determined by size of the investment and the number of points by which the price of the stock has moved. When you trade binary options stocks, you only need the price to move by one pip for direction-based Call/Put trades, or for the price to hit the specific targets to get the returns on investment.
- In stocks binary options trading, you do not hold the actual stock itself. In traditional stock trading, you actually purchase and own the stocks in question (or you borrow them if you are short selling).
- Stocks transactions in the traditional stock exchanges do not expire. Once you buy a stock, you can hold on to it forever if you wish. Stocks binary options expire.
- The only stock assets traded as binary options stocks are those of blue chip companies and medium cap companies. You will not see any microcap stocks/penny stocks traded as stocks binary options.
How to Trade Stocks Binary Options
In many of the traditional stock markets, it is only possible to profit from trading stocks when they are in an uptrend. In other words, you have to buy the stock, wait for the price to rise and then sell to make profit. These are mostly stocks listed in exchanges where short selling is banned. But in some markets like the US stock markets, you can profit from upward or downward movements of equity prices. So you can short sell a stock and profit from falling prices.
In stocks binary options trading, you can profit from rising and falling prices. So exactly how do you go about profiting from stocks binary options?
The first step in the process begins with selecting a broker that offers the trader’s preferred binary options stocks list. What does this mean? The binary options stocks are a collection of stock assets from different exchanges from around the world. It must be recognized that traders tend to be more familiar with stocks listed in exchanges located in their regions than stocks listed in other areas. For instance, a German wishing to trade stock binary options would more likely be familiar with equities listed on the Xetra Dax than on the Dubai Stock exchange. This trader would definitely prefer to trade with binary options brokers offering stocks binary options that feature German companies such as Deutsche Telekom and Commerzbank. A US trader will probably have better information about Facebook shares or shares of companies like Tesla and Coca Cola than shares of Alibaba or Baidu. So in other words, choose a binary options broker that provides access to the preferred market to trade.
The second step would be to locate the trading hours of the stocks binary options to be traded. For instance, the trading hours of the Nikkei 225 will be different from the trading hours of the Nasdaq. Within each of the trading hours, there are times when the stocks you want to trade as binary options would be most active. Take note of these times and trade at those times.
Following on from step 1, you should naturally trade only the stocks binary options you are familiar with. Each stock has its own characteristics, their own behaviours and their own market fundamentals.
You must know the market fundamentals for the stocks you want to make predictions on. Earnings reports are a key determinant of the trading choice of binary options stocks to be traded. Earnings reports can produce big movements in stock prices. You must know the earnings seasons timetable at the back of your palm and know when the key releases will hit the newswires. Thankfully, due to the fact that stocks are traded only at specific hours (never mind the after-hours trading which is not available to retail traders), any earnings report or market news that will affect the stock to be traded will still push prices once the market opens for the next trading day. The earnings seasons are not really the time to trade with robots or indicators. Avoid them during those times.
Test your trading strategy on a demo platform. As much as possible, seek a platform that offers demo account trading. This is where you can test your robot software and indicators. You can easily sift out software scams and learn how to trade binary options stocks.
Study books and research tips on how to increase your returns on investment. 9 out of 10 traders in binary options do not review their trades, especially the losing ones. Discovering what went wrong is a lesson at learning how not to trade a stock binary option.
It is also a good thing to study market correlations. The price movements of certain stocks have correlations with events in other markets. For instance, when global crude oil prices fall, it will affect the stock price of energy equities such as BP, Total, ExxonMobil, etc. Understanding these correlations will help you make better trade decisions.
Q: Which is more profitable? Trading stocks in the stock markets or trading binary options stocks?
Answer: There are many factors which affect profitability. No market is more profitable than the other. There will always be traders who make profit even when others are losing money in any market. Rather, profitability is a result of personal input made into the trading process.
Q: What stocks can I trade?
Answer: Stocks binary options are usually made up of stock assets pooled from several exchanges in Europe, the Middle East, Asia and America. You can make a choice of hundreds of stocks listed on your preferred platform.
Q: When can I trade stocks?
Different stock exchanges have their trading times. Take note of the market hours of the exchanges where your preferred stocks are listed. Your preferred stocks binary options will only be available for trading during the market hours of the parent exchanges.
Q: Do I own the actual stock when I trade binary options stocks?
Answer: No. You do not own the actual stocks, because you are only trading the stock price changes on the platform.