Binary options trading is dynamic, exciting and takes a holistic understanding of stock market intricacies, if you want to profit from it. Stocks rank as an asset derivative that one can trade with in the binary options sector. Mostly, the traders can access several assets(about hundreds or more) and use them for trade purposes; this is because the brokers collate assets options from various indexes around the globe.
A nicely formulated spread would comprise of stocks from worlds’ top ranked exchange centers, including America, London, Middle East, Germany, Switzerland, Spain and Eurostoxx (comprising of companies situated in Belgium, Netherlands and several other central European nations). Now this is the kind of trading spread that would equip a trader with astonishing array of stocks to use for the trading activities.
If you don’t use binary options signals or software, then this article will be very helpful. If you do, it will still give you some knowledge that can help you with manual intervention.
Factors to Consider When Taking Binary Options Trades
It is hardly a matter of secrecy that if you want to survive in a professional market, you need to have an in-depth understanding about the core operations and mechanisms. In Binary options trading, the significance of becoming proficient and familiar with factors, that may influence trade price mobility, is paramount. Some of the factors that you must tend to while participating in binary options trade are discussed below:
Factor#1: The Market Environment
Whether its binary options or another form of trade market, the overall market sentiment holds a significant meaning. If the market environment is panic ridden or gloomy about the overall economic conditions, most of the investors would simply hold back the cash and would prefer to sell the trade holds. This pattern in trade market would lead to an eventual fall in the prices of stock.
Factor#2: Report of Earnings
Trade prices rise or fall, in accordance with the type of earning report; i.e. bad or a good one. However, the primary question in this scenario would be ‘what comprises a bad or a good earning-report?’. So, let’s consider an example company that has reported a loss in recent year; this loss in earnings may be interpreted as a ‘bad-report’ but it can also be interpreted as a ‘good report’ if the loss is less than the loss suffered in a previous year. It all would depend on the comparative context that the investors would choose to consider.
Whichever direction the interpretation takes would control the asset price and desirability in the market; a good-report would increase demand and price while the bad-report would inflict a decrease in both aspects. Alternatively, the profits that are declared by a certain quoted company may or may not be viewed as good, if the profit percentage has decreased. They may also be viewed as an indicator of under-performance in comparison with the competitors.
Another important factors that a trader must keep in mind while depending on the earning-reports is that, they must be able to access the historical data in order to use earning-reports for binary options trading. Moreover, the usage of earning reports has a limited usability because they can only be utilized during a quarter of the earning season (making them a seasonal perk in binary trades market).
Factor#3: Acquisitions & Mergers
Primarily mergers or acquisitions are focused towards enhancing the competitiveness and overall company standing. Therefore, they cast a sufficiently positive impact for the parties that are involved in the merger.
Factor#4: The Policies that Matter!
Well, the policies that would matter most would, usually, be the governmental ones. These policies may impact the stock prices negatively or positively. For example, when the government alters a policy to increase the import duty on raw materials for a certain industry…this may be detrimental to the profitability of companies that are affected. Such changes would negatively influence the ability of affected companies to express them appropriate in the competitive foreign market. While a waiver on import duty may enhance overall profit for the concerned companies (or, affected companies).
What Should We Do Then?
So, with all the above enlisted factors in mind…the question remains; ‘how do we go about binary options trade?’.
- The first thing that a trader must sort out is to identify the direction in which the trade would most likely move (after a certain news release that may influence share price of the concerned company).
- At this point, the trader should be able to choose any type of binary options trade that befits his trading profile. For example, an earnings report can acquire a sustained response that would also be long lasting.
- In a situation like this, the traders may then choose to go with No-Touch or Touch options by using a price barrier that is appropriate while also paying attention to any resistance levels or recent supports.
- In case a news release is very strong and may affect the share-price to spike unpredictably (for a company), the traders have the option to decide to trade some of the high-yield options.
To conclude, all of this would ultimately depends on the trader and hiso or her inclination towards a certain kind of trade that would best suit at a specific time. Do you have some secrets for newbie binary traders to succeed in the binary options trade? If you do, then, share them with us in the comments below!