When you are binary options trading, you will be aware of just how many underlying assets there are in various classes. In addition, you will also have the choice of dealing with several types of trade contracts for a particular asset. As such, traders are faced with the choice of not only deciding the type of asset to trade in but also the type of trade contract to enter into. In binary options trading this also means which type of platform to use: Touch,no touch, range trading or binary options.
Now we know that gold is more volatile than a frequently traded currency pair like the EUR/USD. When a trader has four main classes to select from, forex, commodities, stocks or indices, he has to ask himself what kind of trade would be more simple. What can he grasp better? Well its very hard to be an expert on all or any of the stocks as there is so much information coming out all the time from the firms and so many factors moving the stocks prices. It’s the same with the indices. Gold or EUR/USD though can be easily monitored. They commonly move against. EUR/USD and gold are safe havens so when investors are rushing to the USD they move away from the gold and vice versa.
If you read our daily news section you can easily understand the factors that move these two assets to gold or the EUR/USD. So in the morning read the technical analysis, get a feel for what the markets are doing anf then come up with your binary options trading strategy for that day. Match your trading strategy with the asset that you are dealing with.
Source: Yahoo! Finance
As we can see from the price chart of the EUR/USD for the previous 5 years, the EUR/USD has been ranging between the $1.2000 to $1.5000 mark. Gold, on the other hand, has experienced wild fluctuations in its price. If we look at the chart for gold prices for the last 40 years, you will notice that gold has been on an uptrend since 2001.
We can also see that between 1979 and 1983, the price of gold spiked wildly from an average price of $30 per gram to average price of $80 per gram. In percentage terms, this equates to a price differential of over 260%. The same can hardly be said about the movement of the EUR/USD currency pair.
The above analysis shows that for a trader who wants to trade in both of these two assets, he cannot employ the same type of trade. For what we have observed, the EUR/USD currency pair is more suited for Range options while gold is more suited to be traded with Digital options or Touch options. The more volatile the asset the more your chance to profit from the movement.
Nevertheless, the behaviour of the assets used in our example is not set in stone. Instead, what needs to be stressed here is the fact that we can use our observations at a particular point in time to see what type of trade is to be used for an asset that we are interested to trade in. once, we have an insight into the behaviour of the asset, we can perform further technical analysis on the asset to get the ideal entry and exit point into the market. In this section you can go further and implement technical binary options trading strategies to your trading.
Binary options trading is an interesting and exciting trading option yielding high returns on low investment capital. It’s especially beneficial for day traders. As we understand it, binary is a computer related term meaning two, or zero and one. Similarly when we apply this to trading, a binary option is a trading contract which has just two outcomes, zero or one, or shall we say all or nothing.