Underlying Assets In Binary Trading
The operating format and conditions on the binary options market allow for the use of any financial market instrument as the underlying asset. With the same effectiveness and efficiency, you can make a profit on assets from the stock, commodity, and foreign exchange markets, as well as the precious metals market. However, when choosing an underlying asset, many traders lose sight of the following parameters that can influence the result: the time of trading, the type of trading strategy, and the overall market situation. Against this backdrop, we will consider the optimal conditions of use for the main types of underlying assets available on the options market.
Thus, the basic list from options market brokers offers the following types of underlying assets:
- Stock market assets
- Currency market instruments
For each asset, there is a specific list of the best trading conditions and trading systems that allow you to achieve the maximum results.
Underlying assets of the stock market
This list generally includes securities, the issuers of which are large global corporations. For example, the Binomo broker’s trading platform includes securities underlying assets from the following companies: Google, Apple, Alibaba, Nike, BMW, Mercedes, Tesla, and over 25 more names.
For this type of binary trading underlying asset, the following optimal conditions for trading are characteristic:
- The operating hours of American trading platforms
- The use of trading systems on the news and technical analysis systems
- The use of options with durations of expiration from 3 hours to a day
- A risk limit level of up to 10%
Stock market assets as a financial instrument for binary trading are profitable enough to use as a means of investment using binary options. In this way, you can earn the maximum profit on the well-projected volatility of a company’s stock quotes.
Underlying assets of the currency market
This tool is a classic of binary trading. Currency pairs are used by the vast majority of traders on the binary market. Such popularity is due to the high volatility of currency market asset fluctuations, the wide availability time-range, the great choice of instruments, as well as the long list of trading systems that work best specifically on currency pairs.
The optimal conditions for trading on foreign exchange market assets:
- The entire operating period of stock exchanges
- Indicator trading strategies, chart systems (the choice of strategy should take into account the trading hours)
- An options maturity range of 60 seconds to several hours
- The most restrictive money management – up to 5%
When using foreign currency assets, it is recommended that you trade on a professional platform with the best technical equipment. As an example of such a terminal, we can recommend the one developed by the Binomo broker’s specialists. Here you can get the full list of technical and trading tools, as well as the optimal trading conditions with the minimum initial account balance and cost of contracts.
The main representative of this type of underlying asset is considered oil. At present, the hydrocarbon market is showing high dynamics of price movement, which allows the trader to earn a very high income with the help of binary options. The attractiveness of commodity assets is due in part to their volatility, but also to the high level of predictability of quote fluctuations.
The optimal conditions for the use of commodity assets:
- The end time of the European and the start time of the American trading sessions (these time periods see the highest number of releases of informational publications that influence this type of underlying asset)
- Trading strategies on the news, systems based on candlestick patterns, the classic systems of Price Action
- Contract expirations of 1 to 5 hours
- Limited risk at the level of 3%
The correct choice of strategy and time to trade commodity assets will allow the trader to get the highest results on the binary market.
The metals market
Despite the fact that price quotes of gold and other precious metals are not used very often in binary trading, this underlying asset is the most versatile for trading on the options market. The high degree of predictability of this area of the financial market, the use of gold as a safe haven, and the relatively good volatility of price movement allow the trader to use any trading strategy, conclude transactions at any time, and use the classic rules of money management. Metal market assets, when used properly and in conjunction with highly accurate indicator strategies, can be the best choice for the trader.