Connecting Commodities and Stocks For Multiple Trades | Forex Options

Connecting Commodities and Stocks For Multiple Trades

Connecting Commodities and Stocks For Multiple Trades

Multiple binary options trade opportunities can come from the ability to connect various assets. Two of the easiest asset groups to find connections within are commodities and stocks. Within these groups are a number of underlying assets that often experience similar or opposing price movements, both of which can be profitable when forecast correctly. When these similar movements do occur, it will be possible to enter into more than one trade based upon the noted price action of each asset.

These connections must first be recognized before taking any action. Each broker will provide an asset index, or listing of all of the underlying assets they provide for trading within their platform. The best plan is to peruse these lists, first noting any obvious connections. For example, crude oil can be linked to the stocks of companies such as Exxon, BP, and more. Another example would be the commodity coffee, which can be linked to companies such as Starbucks, McDonald’s, and more. Connections such as these should stand out immediately.

Using the crude oil example listed above, the strategy will be to monitor how related stock prices change along with the price of oil. When the price of oil is climbing or falling, related stocks prices often will be doing the same. The coffee example could produce the opposite effect. Here, if the price of coffee were to increase significantly, Starbucks may be forced to pay more for the product, and this could be reflected in their earnings. Both positive and negative impacts must be taken into consideration.

One of the benefits of trading along with connections is the ability to spread risk out a bit. Rather than having potential profits hinge on one binary options trade, several positions could be opened based upon the noted price action. This can help to lower the overall level of financial risk. All opened positions may not finish in the money, but losses can be minimized by any wins. Of course it is also possible that all related positions do finish in the money, providing a nice boost to your account funds.

It will be vitally important to understand how specific connections work. Do prices increase or decrease in conjunction? Or do prices move against each other, with one climbing while the other falls? These types of movements are never guaranteed, but the goal is simply to know where to look for multiple trade opportunities when asset prices are on the move. Success will be directly related to how well you understand these connections, as well as how skilled you are at performing technical and fundamental analysis.

In reality, connections do exist among other asset groups, as well as within single groups. The more a trader knows about underlying assets, the more he or she is likely to earn. Investors have been using this type of information to base investment decisions on for decades. Today, binary options traders can and should use this same type of information as a means of earning more profit from the markets as well.

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