How to trade binary options is an article dealing with the differences between regular trading and binary options trading. We cover what are the more important signs to watch when trading binary options and what signs that are used in regular trading we can overlook. If you are interested in the elementary functional guide regarding the necessary steps for trading binary options ( choosing an asset, choosing a trading method, place a bid) use our binary options tutorial.
Binary options are unique in their predefined conditions and outcome but this is not the only thing that makes them unique. Although binary options trading is based on regular trading of forex, stocks, commodities, indexes, and bonds, there are aspects we have to take into consideration that are less significant in other forms of trading.
In call / put binary options (also known as: up / down , above / below ), you are required as a trader to predict the direction of the graph in the time interval until the option expires. In a case there are very relevant news with obvious outcome (like a statement by the Federal Reserve about the increased U.S. debt that should drop the value of the USD), the news take the most significant factor in our decision regarding our bid. We need to get updated with economic news and an economic calendar if we want to know about these statements. These statements are most important and have the greatest impact when they are released and with time their impact is weakening. When there is no significant news relevant to the asset we trade on the number one factor in our decision is the trend. Trend isolation (understanding what the current trend for an asset is) can be achieved using many techniques but the most common technique is the moving averages which is a technical analysis technique based on a chart overlay. When there is a crossing of the moving averages the trend goes with the direction of the short term average. If the short term average gets below the long term average the trend is going downwards and if it goes above the long term average the trend is upwards. The moving averages provide us a trend indication but the crossing may occur only after the trend is solid and may be vulnerable to corrections. Traders new to moving averages should practice using them to acquire the experience of using them correctly. For call or put method this is how to trade binary options.
In range binary options (also known as boundary ), you are required as a trader to predict whether the rate of the asset will be in or out a certain price range when the option expires. The price range is a calculated range and may vary dramatically between different brokers so the first thing to do when approaching the range method is to open your different accounts and check for the best range available. Range binary options deals are most successful when using trendlines combined with support and resistance lines. The support and resistance lines should include historical lines and Fibonacci retracement. In cases we have strong resistance lines before we get the rates of the range we tend to recommend our students to be cautious because the risk factor increases. Another measure we take to reduce the risk is to use the Bollinger Bands and check the volatility and expected explosion direction. High volatility indication make distant price ranges more realistic while lower volatility may indicate stagnation and low chances for the price to progress towards the range. In cases that the price range is defined “around” the current price, lower volatility is perceived as a good indication. For range method this is how to trade binary options.
In one touch binary options (also known as Lock-In and Touch Digital ), you are requires as a trader to predict whether the price will “cross” a certain rate prior to the option’s expiration. The range binary option and the touch binary option are very similar in their essence because they require the issuer of the option to specify rates for the asset other than the current rate. The proprietary algorithms of the binary options platforms are different and therefore generate different rates. In one touch it is also recommended you compare several brokers before placing the bid so you can find the best rate offered at the moment ( in general the closer it is to the current rate, the better). The most significant factor we consider in the one touch is volatility. In this case because the volatility is so important we use not only the Bollinger bands we use in range options but also the Average True Range ( ATR ) indicator to give us the chance of a volatile explosion in the asset’s rate. When using professional graphs, it is recommended you learn more about customization of these two indicators and that you try and set them to use shorter periods to calculate the average which is more suitable to short term binary options. For one touch method this is how to trade binary options.
The how to trade binary options advanced guide provides only general recommendations that may vary from case to case. Please consider reading the binary options strategies and check the binary options wiki sections.