Professional traders have long had the understanding that within equity markets some assets will move as pairs. In some cases they increase or decrease in conjunction. Occasionally they will shift in opposing directions but in reflection to each other. This is the reason as to why market analysts speak about market sectors of the economy. Pairs are certainly an element which binary option traders will wish to take note of.
Currencies have always and will always be traded as a pair, with the performance of one being directly compared with that of the other. A few binary options brokers are now supplying options in pairs of different assets as well. The purpose of these pairings is to be able to determine which of the two assets will perform better than the other within the set expiry time period. Expiry times when trading with pairs can be as lengthy as several months.
The two types of pair options are the fixed pair and floating pair. Let’s take a look at how each of these differ so that you will know which pairings may benefit your binary options trading activity most.
The fixed pair will be used for the trader to purchase a contract option based on the performance of two assets and not only one. The prediction here will need to be in regard to which of the two assets will exhibit better overall price performance from the time the trade goes live until it expires. There will be both a fixed expiry time and fixed payout percentage.
Traditionally, the binary options trader would need to wait until the full expiry time period had run its course in order to collect his or her profits. This fact was one of the main differences between fixed and floating pairs. However, broker features are often changing and now a few brokers are allowing for variable closings on fixed option pairs.
The main difference between floating options and fixed options is the starting position from which the overall performance of the asset pair is measured. With floating pairs, the beginning point is not predetermined at the time the option is utilized. Instead, it starts at a presented time and carries on until expiry. For that reason, most binary option trades of this form transpire after the comparison of pair performance has commenced.
Some of the advantages of trading pairs are the same as basic binary options trading advantages. For one, it makes no difference whether the assets perform well or poorly, so long as you have chosen the one which will perform better, you profit. Pairs remain one of the best options for long-term trading, which has quickly fallen to the wayside in favor of fast trading.
Both technical and fundamental analysis will still be needed with trading either fixed or floating pairs. However, it should be easy to complete analysis when narrowing everything down to two underlying assets. At a base level, asset pairs will provide binary options traders with yet another means of cashing in on their market knowledge.