Day trading binary options
What is Day Trading?
Over 10 years ago, a new way of selling options contracts in the market was introduced, called binary options trading. This trading method is suitable for people who are new to trading and want to learn more. In fact, many people find this method of investing as easy as possible. However, this does not mean that you do not take risks. There is always the possibility of losing money. So approach it carefully and make sure you understand all the information.
The main feature of binary options is that they give the player a clear understanding of how much he can win or lose and a simple choice. In essence, all the player needs to do is bet on one of the events. Hence, the name of this type of trading. Let's look at some popular types of binary options.
A binary option is an option that determines the final outcome of a trade in terms of 0 or 1.
In other words, it is a derivative financial instrument, characterized by fast terms of the transaction, in which the trader is asked to predict one of two ways of market behaviour in relation to the underlying asset: either the asset rises or falls within a predetermined time frame.
- The first and most classic variant is "Up/Down" or "Call/Put". All other options are based on it. You have to correctly choose the direction in which the price will move after a certain time. All you have to do here is to choose one of the actions and if by choosing 'Up' the price at the end of the option expires higher than at the start - the dealer will make his profit.
- Touching. When working with this tool, the trader has to determine which level the price will (or will not) touch when it rises or falls. Regardless of where the price moves when it touches the designated level, the trader has already made his money. Another option for options is not touching a certain point as such. If in the previous case the dealer would get his profit after the first touch, here he has to wait until the deal is completed. If in this time the price does not touch the previous marker, the trader gets the profit.
- Range. To execute this type of range profitably, the dealer needs to specify the price range within which he thinks the price will change at the designated time.
- Spread. A forecast is made not only for the fact that the price will be above or below the current rate, but also its exact value is specified. For example a trader can make a forecast for 5 pips drop in the next 20 minutes.
- Ladder option is the most complex type of contract. They specify several price levels, the achievement of which within the specified time of option's execution can bring up to 600% of profit. Each price level is a bet. So you make several forecasts at the same time. One level is one prediction.
Beginner dealers of binary contracts are recommended for the simpler varieties, which can be changed to more profitable options in the process of achieving trading results.
Every broker offers different options and this has a lot to do with their expiry times. Conventionally all option periods can be divided into the following groups:
- Extra-short options. The expiry time is 10-15 seconds. Traders will have to be more stressed to catch small pullbacks and market fluctuations for options with minimal expiry times.
- Short-term. They last from 1 to 30 minutes. Risks are relatively high due to random market movements.
- Intraday trading takes place only intraday. It means that the time frame ranges from an hour to 24 hours (twenty-four hours). The investment amounts are varied.
- Medium-term. Their duration may vary from a few days to a week.
- Long term. Perfect for investors who do not want to or do not have the opportunity to spend much time near the monitors. They will have to identify long-term trends.
Intraday trading - work with orders which are not carried over to the next day.
Intraday commerce is considered less risky as it is conducted on higher time frames. Signals are more accurate and indicators work clearly. In addition, you can back up the technical analysis with fundamental analysis.
Day trading binary options are most responsive to market movements. The emergence of any significant news, statistics or other information can be immediately reflected in the price. This strategy allows you to save time and make a profit in the shortest possible time.
Technical analysis for binary options day trading
Even if you are new to the options market, you have probably heard of technical analysis and the use of charts to visualize market movements. Binary options day trading is no exception, and forecasting on them is also done by means of technical analysis. Technical analysis is the study of price charts, identifying patterns in price movements in order to predict future price movements.
Technical analysis is based on the theory of market efficiency which states that the current market price takes into account everything.
Charts are basically of 2 types. Linear charts and candlestick charts. Linear charts only show the closing price, and can show you how the price changed over a period. The Japanese candlestick chart is a popular and most informative type of stock chart. It was developed in the 18th century for commerce on the Japanese rice market, and has survived until today without significant changes, while remaining extremely clear and effective.
A Japanese candlestick chart is based on four indicators: open and close points, maximal and minimal price. Each section of the chart reflects the state of these signals of the position in a given period (timeframe). The different types of candlesticks allow dealers to identify the position of bulls and bears. The movements on the chart form typical combinations (patterns), by which a dealer can predict future price behaviour.
There are dozens of indicators and hundreds of strategies based on them.
Signals for options are usually built into the trading system, and to increase reliability traders analyze signals from multiple indicators.
This allows a more accurate assessment of market conditions and the timely opening or closing of trading positions. In this case, the market player saves his capital and receives a good profit.
The best indicator for day trading binary options that is often considered is the Stochastic Oscillator. It is included in 80% of all existing trading strategies. The Stochastic allows you to determine when a trend reversal is about to occur and will tell you exactly when to open a trade. Study it thoroughly, you will find a lot of information about it in books or on the internet.
There are other signals, such as the Relative Strength Index, or what is known as the RSI. The RSI reading oscillates between 0 and 100. RSI is considered overbought when it reaches 70 and oversold when it falls below 30.
Moving on, you can also look at the Bollinger lines and the MACD. These two indicators can help you decide when to place your trades. They both show a lot of information about price action. Bollinger Lines - this channel indicator is excellent for showing current market conditions and volatility on a chart, and its channel format allows you to determine changes in the direction of price movement. We will also use the MACD oscillator to enter into transactions only when the price is about to change direction. This automatic market analysis tool is also very effective - due to its ability to display the trend, its strength and dynamics, we will avoid opening trades on false price manoeuvres.
Looking at the technical analysis chart, you will notice that there are certain elements which should always be present. These also include the moving averages signal. The best part is that you can adjust them so that they work in different time frames. This allows you to see what is happening over a longer period of time, and this is the key to successful day trading.
One of the advantages of using graphical models of technical analysis is that you can make better decisions, especially when you are not sure where the price will go next.
Assets in day trading binary options should be highly liquid. While the long-term investor can afford to invest in quiet stocks with a 20% annual growth rate, the day trader must choose the most volatile or trend-following assets, in order to make the most of the day's volatility. The higher the volatility - the higher the potential profit.
Aside from charts and indicators, it is also important to remember to monitor the market and the news and make sure you understand what is happening. This is a great strategy to ensure the success of your options commerce system.
How to start day trading binary options in New Zealand?
An online binary options day trading platform is a great place to start trading in New Zealand. These companies offer systems that allow you to sign up using a demo account and then open a real account. The platform also provides you with the latest news, a user-friendly and professional trading terminal, chats with dealers, charts, trading tools, a mobile app and much more. You have to register for free, and it all becomes available to you, just try it out, it doesn't bind you to anything, but it opens up possibilities!
Many people think that it is difficult to learn about options commerce in New Zealand. In fact, it is not difficult at all. You just start out simple and practice a lot.
If you're afraid of losing money, we suggest you start your business with a demo account.
A virtual account will prevent you from withdrawing any real profits from your account, but it will also keep your budget intact. Since you are being offered a fake amount of money, it will be deposited into your account as soon as it is opened. This will give you a great experience and understanding of how the system as a whole works. You will also be able to understand what strategy you are prepared to choose, see how much time you spend on the exchange, and which tools you are comfortable using. See where your weaknesses are and explore them further. Once you have registered, you can start testing the software to see how it works.
Once you have set up your demo account, you can start learning about options commerce in New Zealand, and the platform has various instructional videos to help you learn about the different aspects of day trading. You can also find answers to frequently asked questions in the appropriate section. It will take you some time to go through all the information you need, but it will be worth it because you can trade options from the comfort of your own home.
Aside from the virtual account, you can open a live commerce account for day trading binary options. To do this, after registering, you'll need to select a menu with a commerce account and make a deposit. After that, you'll be able to place your orders and start buying and selling assets. Follow the status of your account in your personal client cabinet and analyse your profits and losses.
So, day trading binary options are actively included in traders' trading portfolios. They are a great way to diversify your risk and practice your short term investing skills, try it, you can do it!