The prices of select stocks will often change in relation to one another. Sometimes the movement is in the same direction. Other times, it is in opposing directions. The significance of this is that one stock can react to the performance of another, and this is where pairs trading comes in handy. Currencies are an excellent example, as these are always traded in pairs, but in the binary options realm, other asset pairs can also be traded.
The goal when trading pairs is being able to predict which of the two assets is going to be able to outperform the other. The same as with any digital options trade, an expiry period does apply. Pairs exist in both fixed and floating styles. Fixed will be the only style available when trading digital options, but it is still important to know the differences between the two.
With a fixed pair, youâ€™re going to know the exact starting value for each asset. This will be the mark against which the performance is measured. You simply want to determine which of the two assets is going to have become more valuable by the end of expiry. If your selected asset does perform better, you earn a profit. Fixed pair trading with Broker Options comes with fixed profits as well. Youâ€™ll always know what you stand to earn in advance of each trade.
With floating pairs, the starting price is not fixed at the time an investment is entered into. This type of pairs trading can carry on for quite some time, often even months or even longer. There is no fixed profits, so the difference between the asset prices will make a difference when trading with floating pairs. With binary options pairs, the only thing that matter is that your selected asset has performed better than its paired asset at the end of the expiry period.
When trading pairs with Broker Options, youâ€™ll discover that pairs can come from the same asset class or different asset classes. Your objective is always to complete analysis and then decide to the best of your ability which of the two asset is going to perform better. Even if the value of each goes down, you can still profit if your chosen asset performs better than its pairing.
Pair trading is just one more option to consider when investing in digital options. This type of trading can yield extremely easy profits during times when one asset is clearly in better shape than the other. Some quick and simple analysis can tell you all that you need to know about which asset to select for your pairs trade.