By FairValue Trader MrTopStep. With the changing personality of the futures, forex, and stock markets, many traders have been looking for an alternative that will give them the flexibility that today's markets demand. Binary options are exploding in popularity in the Unites States, with CFTC-regulated exchanges that specialize in these limited-risk products.
Many futures contracts were developed before the Internet age when most trading volume came from large institutions. Exchange-traded binary options can appeal to large traders, but are designed for the smaller trader. Some reasons why traders are moving over to binary options are simple. With binary options, there are no margin calls or leveraging concerns.
Your risk is limited to the amount used when entering the trade; so even if the trader is caught on the wrong side of a market move, there is a built in stop-loss already in place.
Binary options trades can be large and small.
Many futures traders trade single lots; and for many account holders, especially those with smaller accounts, the single lot size is suitable for maximum size. However, what if you wish to trade smaller?
Traders can risk a little or a lot; they can trade a single option or multiple options depending on their needs. Many of these options can be purchased with much less capital required. These options reward good market calls while minimizing risk. The good thing about binary options is the flexibility they offer to craft a strategy in many different underlying markets given your market view.
Binary options are a great tool for new traders. Many times, it is difficult for new traders to learn without experiencing real risk.
The problem can be that the transition from a demo account to a live account can be a painful learning experience. Binary options can be used as training wheels, giving traders an opportunity to trade market direction with real money.
Binary Options Trading for Living - Myths and Tales
Binary options create new opportunities. In recent weeks, many markets have seen a decline in volume as well as the daily trading range.
Many traders learn to walk away from slow markets and avoid being caught trying to find momentum in tight ranges. Some traders even leave their desks during the quiet hours of the trading session to avoid being caught in the grind.
Not so with binary option traders - the tight, quiet range-bound hours and days can be some of the most exciting times with binary options, as the flexibility of these contracts allow for traders to capture profit even with a range-bound view.
The market has been going nearly straight up in recent weeks and now may be struggling with the Let's say that you believe this index is due for a small pullback and will close this week lower than the weekly open of You could sell short the weekly US binary Assume this binary is trading at 67 which means shorting at this level, the trader wants the binary price to trade lower and ultimately expire at 0.
If the underlying futures does close below the For this trade, it has a 2: Assume this binary is trading at Selling the binary at this level, you want the binary price to trade lower and ultimately expire at 0.
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If the underlying futures closes below the These are just a few of the reasons binary options have become a great addition to any trader's tool chest, offering a flexible way to potentially profit in today's markets.
Exchange traded binary options regulated by the CFTC in the United States, offer options on many different asset classes including equity indices, commodities, and forex, using multiple expiration time-frames ranging from weekly, daily, hourly and even within the hour. This gives you, the trader, multiple trading choices to try to capitalize on your market view with limited risk. See TradingCharts' Privacy Statement.
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