TorOption: A Crash Course to Professional Binary Options Trading
Binary options is a relatively new market, but there’s nothing new to it from a risk perspective. Every financial market has some level of risk tied to it and not giving that risk enough consideration and respect can burn through your capital quick. You’ll end up replenishing your account multiple times, which will ultimately dry up your bank account. It’s the same sob story every amateur trader has gone through. Avoid being a statistic by learning this crash course on how to trade binary options like the pros do.
Understand What It Is
In a nutshell, binary options is an anticipated direction or performance of price during a specific time frame. The words “time frame” are what differentiates the binary options market from other artificial markets. In other markets like stocks or currencies, the investor actually buys or sells the asset they invest in. Depending on the price fluctuations since you bought/sold the asset, the profit or loss is determined .
The dilemma with this type of investment is that it requires the investor to proactively monitor and stress about when to close their position and get out of the market to avoid exposing his/her account to further losses. Conversely, binary options trading is much simpler. In this market, participants trade future price levels for a predetermined time frame hence the psychological stress is lessened and capital risk is kept at a minimum.
In a binary options play, you can only either Call or Put. If you think the price of an underlying asset will rise over a given time frame, you open a Call option. If you think the price of an asset will drop, you place a Put option. Everything up to here is pretty straightforward even for novice traders.
Choosing an Underlying Asset
Which asset you will be trading with is the next step after gaining solid footing on the basics of how binary options work. The ability to trade different underlying assets is one of the unique characteristics of binary options and why they merit space in your investment portfolio.
Trading binary options allows you to express trade ideas in an almost limitless number of ways. For example, if gold is anticipated to be the most volatile asset next week or next month, you can purchase a Call option in gold and partake in the anticipated volatility to come. On the other hand, a stock market trader who doesn’t have access to binary options will be unable to participate in gold’s price movements.
Professional brokers like TorOption offer contracts in a wide array of financial products. Major indices like the Russell 2000, foreign currency pairs like EUR/USD, silver and oil commodities, and tech stocks are all viable instruments you can buy into when trading binary options. Ideally, you should focus on a financial market that you actually understand and have experience trading with.
Choosing Contract Time Frame
When you’ve figured out which underlying asset you want to trade, you should now choose the expiry time for your trade idea. Contracts can last for as short as 1 minute to as long as 1 month. The decision will mainly depend on your investment goals. How comfortable are you with parking a chunk of your capital for weeks without touching it? How much risk can you take on before closing a position? What sort of growth rate are you targeting for your investment portfolio?
Technical Vs Fundamental Analysis
Determine how you plan to approach a trade idea. A technical approach means that you will spend majority of your time working with numbers and trying to confirm trade ideas based on historical data and price-derived indicators. Meanwhile, a fundamental approach looks at the broader economic scope. It tackles the macroeconomic and microeconomic forces that interact and affect each other, such as central bank rates and geopolitical turmoil.
Increasing Trading Capital
Having the right strategy is only half of the equation to succeed in trading binary options. You will also need the right mindset and adequate capital to trade in a disciplined fashion. Increasing your trading capital also means an increase in buying power and amplification of potential profits in leveraged positions. Traders can easily increase their trading capital by looking for promotional offers by brokers, such as loyalty perks and signup bonuses. These promotions can bundle in deposit-matched bonuses and even some commission-free trades.
Succeeding in Binary Options
Keep in mind that succeeding in binary options trading doesn’t mean a trader has to be 100 percent correct every time. Consistent profits come from a systematic approach that combines fundamental or technical analysis with effective risk management principles. It will take some time, money, and energy to construct a systematic way to profit from binary options trading, but it is certainly a worthwhile business venture to add to your investment portfolio.