- It’s a new form of trading with much lower financial requirements, and it only needs an Internet connection in order to get involved and start trading. Unlike other forms of trading, the basic concept of binary options is very easy to grasp. You just need to decide if an asset you’re interested in is going to rise or drop in price during a specified trading period. If you’re right, you profit. You’re trading on the MOVEMENT of the asset, you’re not actually buying anything that you need to sell later at a higher price in order to profit.
- Because of its relative newness and lower barrier for entry, binary options trading has seen a lot of people from all walks of life taking a chance and trying to their hand at it. For some experienced business people, this is merely another way to navigate a familiar world. For many others however, this is their first exposure to the complex world of finance and there can be a lot to learn. While the trading aspect is easy, the strategies behind your final decision can be quite complex and involve many different styles and approaches. Here are a few of the trading methods that have proven their worth over the years.
Fundamental AnalysisThe classics exist for a reason, and this technique carries over from traditional stock trading and is still just as useful in binary options trading. Fundamental analysis is a strategy that involves doing a lot of homework to get a better understanding of the assets you’re interested in, and the market forces that affect them.
So, for example, if you’re interested in currencies, and the British Pound in particular, this would mean studying the economy of the United Kingdom, and which forces affect it. You would follow British banks as well as the politicians that are involved in British economy and finance, and you would begin to develop an understanding how all these pieces fit together and move with—and against—each other. This means that when large events occur, such as the recent “Brexit” announcement of the United Kingdom leaving the European Union, you would have an excellent understanding of how this will affect British currency and would be in a great position to start making trades to profit from this.
Technical AnalysisIf fundamental analysis is about understanding through context, then technical analysis is about understanding through patterns. In this case, numerical patterns. Technical analysis is a strategy that involves looking at actual performance data, like price movements over the years, past behavior of a stock or currency, and using numerous tools, charts and other software to arrive at certain conclusions about how an asset is going to behave.
In other words, because numbers describe how something performs, with enough technical analysis, those numbers can give a hint on how something will perform in the future. The use of computers and complex, powerful analytical software has made big strides in allowing traders to use hard data to make very accurate predictions. If you’re the type of person that is comfortable with data and likes to work with verifiable, measurable information, then technical analysis may be the right strategy for you.
The Signals StrategyThis is not actually a method involving the trader doing something, so much as it is a method of getting expert results quickly. The signals method simply means that instead of making any decisions yourself, you leave it to someone or something with much more expertise.
A signals service is when an experienced trader, traders or a company with very powerful analytics software, allows users to subscribe to their service and act as a “watchdog” on the market. This means that subscribers don’t even have to study how the market works, or pay attention to it at all if that’s not where their interest is. Instead, an experienced trader closely monitors the way the market is progressing and, when a good trading opportunity presents itself, notifies subscribers through email, SMS text or some other medium about this opportunity. Subscribers can then decide if they want to follow through with this and make the trade, or just ignore it.
Software works similarly. There are many powerful algorithms available now that companies have incorporated into their analytical software. These programs have surprisingly high rates of accuracy, usually 70-80% or even more in some cases. The software constantly scans the market and makes comparisons with past market performance in order to arrive at predictions on when and what to trade.
In both cases, a signals method takes all the guesswork and learning about trades, and allows users to concentrate on just making trades when the time is right, rather than studying the hows and whys of a good trade, so it is extremely convenient.