Even though trading binary options is the easiest part of investing in the stock market, trading binary options requires a good knowledge of how trading works if you don’t want to throw your money away. Indeed, in order to maximize the chances of winning in the jungle of the online stock market, a minimum of knowledge and understanding of information and alerts is required. When you trade, you will have the choice between various assets to speculate on, different types of binary option and also different trading tools at your disposal.
Online brokerage firms offer different types of assets to traders. In order to be able to match the interests of different traders around the world, each broker must diversify the assets on his platform, particularly stocks (or shares), stock indices such as the CAC40, commodities (mineral or agricultural raw materials) and currency pairs. The most interesting broker will therefore be the one that offers the largest number of underlying assets and, of course, the most diversified.
For the most beginners, we advise you to take only one asset at the very beginning and master it. To this end, you must establish good strategies in order to minimize risks and anticipate possible asset movements:
- A logbook;
- Learning various techniques and analysis (Japanese charts and candlesticks, social trading, etc.) ;
- The knowledge of the optimal hours for your earnings to be at their maximum potential, in particular the overlapping schedules of the various international markets (European, Asian, Australian and American markets);
- And also an iron will in spite of possible losses, because you don’t always win when you speculate in options on the stock market, and even the biggest traders can suffer losses of varying degrees.
Once you have established your benchmarks, you can diversify your portfolio of underlying assets. First and foremost, here are the main asset classes you’ll need to deal with.
Currency pair, the most common asset
Just like in the world of Forex, currency pairs are very popular. Here, the aim is to speculate on the rate of exchange between two currencies such as the EUR/USD or EUR/GBP pairs which are the best known. There are three types of currency pairs: minor, major and exotic.
- Majors are currency pairs that are more liquid and actively traded around the world. In fact, these pairs are often made up of the most sought-after currencies on the international market (it should be noted that there are 3 major currencies: EUR, USD and YEN). Most of these pairs all include the US dollar (USD), for example the euro dollar (EUR/USD), the British pound (USD/GBP), the yen dollar (JPY/USD).
- Minors are either cross-currency pairs (a major currency coupled with a minor currency) or pairs that do not contain US dollars, such as the Euro Pound Streling (EUR/GBP) or the Australian Dollar and Canadian Dollar pair, better known as aussie loonie (AUD/CAD).
- Exotic pairs consist of a major currency associated with the currency of an emerging economy such as the Brazilian Real (BRL), the Mexican Peso (MXN), the Thai Baht (BHT), the South African Rand (ZAR), the Singapore Dollar (SGD) or the Hungarian Forint (HUF).
Stocks in Binary Options Trading
In the field of binary options, stocks refer to the shares of various listed companies: Microsoft, Coca Cola, Facebook, BNP Paribas, Nissan, etc. Indeed, the companies may relate to different types of areas of expertise.
The trader should therefore choose the stock option asset on which he wants to bet, but we advise to be on the lookout for various economic news, especially on the popularity of these companies on social networks.
Which commodities to trade?
Raw materials are commodities that can be traded on the international market and can be divided into two main categories. The most widely traded mineral commodities, including precious metals (such as gold, platinum, palladium, silver); industrial metals (iron, steel, copper, aluminum), gas, and oil.
Agricultural commodities are less in demand, but can also reap great profits for the trader. The best known is certainly sugar, but you can also find coffee, wheat, cocoa, spices and many others.
What about stock market indices?
Stock market indices refer to the relative applicable values for a stock portfolio. The value of an index will therefore vary according to the values of one or more stocks in that portfolio. In order to facilitate decision-making on the direction of asset prices, the general trend will be taken into account.
The most widely traded indices are DJIA (DOW Jones Industrial Average), Footsie or FTSE 100 Index (Financial Times Stock Exchange), CAC 40 (continuous assisted listing), DAX (Deutscher AktienindeX), S&P 500 (Standard & Poor’s 500), S&P Asia 50 (similar to the S&P 500, but instead covers the major market capitalisations in Asia).