Binary Options Asset Classes

Binary Options guide - asset classes

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Worked your way through the beginners binary guide? Now lets move on to intermediate. Pay attention in the back please, we’re about to begin.

All binary brokers deal with four  types of binary options asset classes. These include Commodities, Forex, Indices and Stocks. Some brokers however do offer an additional class of asset derived from the bonds market. For this chapter, we will just concentrate our review on the four main types of assets that are offered by all the brokers.

Commodities

Among all the binary options asset classes, commodities are the most volatile. Although volatility allows traders to have more trading opportunities, the risk undertaken is also higher. The commodities market covers a wide range of industrial sectors such as agricultural sector, mining sector and power generation sector. Basically they are classified into two categories, hard and soft commodities. Hard commodities refer mostly to natural resources which have to be extracted or mined. Examples of hard commodities include rubber, oil, gold, copper, etc. Soft commodities are usually from the agricultural sector like wheat, soybeans, beef, sugar, etc. A good understanding of the commodities market is necessary before any binary trader can hope to profit from trading in this asset class.

Forex

The forex market on its own is actually the largest financial market in the world. On the average, the daily turnover in the forex market is around 3 trillion dollars. Because of it sheer size, the forex market is probably the most liquid market among all the financial markets. Trading of this asset class is normally confined to the “majors” that is the more frequently traded currencies. These include the Euro, Pound Sterling, Japanese Yen, Swiss Franc and U.S Dollar. Traders of this asset class need to a good grasp of both fundamental and technical analysis if they want to have a profitable venture.

Indices

An index by definition is a statistical used to measure of an economy or financial market. It is normally derived from a basket of assets that is taken to be representative of the sector which the index is supposed to measure. For example, the Dow Jones Industrial Average which is used to measure the performance of the U.S stock market is derived from the prices of 30 major American companies stocks that are traded on the New York Stock Exchange (NYSE) and the NASDAQ. With binary options index trading, traders can gain a broader exposure to the financial markets by trading in this asset class without having to invest in each individual component of the index. Trades are based on the value of the index itself and are less susceptible to fluctuations of the individual component. Binary options traders in general find indices that best asset class to trade with.

Stocks

Practically all binary brokers today offer this asset class to their clients. However unlike traditional stock trading where investors actually invest in the stocks of the company itself, binary traders invest in the performance of the stocks within a predetermined timeframe. The return on investment will depend on the amount invested and the payout ratio. If a trader can predict correctly the direction of a stock’s price within the specified timeframe, then his trade will be in the money. For novices, the investing in binary stock options is a great way to start trading in binaries as prices of stocks are readily available in real time nowadays. Furthermore, they get to have more control over their trading as most individuals will have some knowledge about the stock market.

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