Currency pairs are one of four major asset classes found within binary options platforms. While every trade is going to offer risk and the potential for a substantial reward, currency trading can increase both of these. It should be stated upfront that those who have some previous experience with Forex trading will find it easier to trade currencies in binary format initially. However, the learning curve is not substantial and anyone can learn to profit from price movements.
Some of the strategies used in standard Forex trading can be used to trade binary options with just slight modifications. Even so, it is important to remember that these two forms of trading are inherently different. When trading binaries, there will be no buying and selling of assets, as profits are instead based on accurate price movement direction predictions. There will also be no standard stop loss, although the ability to sell an open position is now presented within some platforms.
The EUR/USD pairing experiences a large daily trade volume, which means that traders can expect to see plenty of price movement. When investor sentiment is strong, expect to see the highest volumes. Either currency can easily begin to trend when country-specific economic data is released. Favorable or unfavorable reports will make a difference, as will reports which a better or worse than what market analysts were expecting.
Millions of dollars are changing hands at any given time within the Forex market. Many of these transactions are directly related to the euro and dollar. In standard FX trading, traders will be hoping to lock in profits when one of the two gains on the other. For the binary options trader, there exists the chance to profit from both upward and downward price movement. This presents additional profit opportunities, as trades can be entered into for both the EUR and USD, simultaneously even, based solely on the direction of price movement.
All major markets are connected in some manner. Big events which impact one major market can certainly impact other markets. At times, the impact with be the same, with both market climbing or falling in value. However, there will also be times in which the impact is the opposite. When trading the EUR/USD pair, it pays to know how each data release will alter trading conditions, and by how much. In addition to the release of economic data, pay close attention to Federal Reserve meetings in the United States, and meeting of the European Central Bank in Europe.
Preparation is a must when trading with this popular currency pair. Price movements may take place quickly, and be short-lived. The expiry time selection should be directly linked to not only the type of price action, but also the anticipation of how long the dominant action may last. Long-term trades can be opted for when the overall trend is sustainable. However, short-term expiry times will be the better choice when movement seems likely to be brief.
As volatile as the euro and dollar may be at times, the pair also provides plenty of opportunities for trend trading. Be sure to refer to an economic calendar when searching for excellent entry points. Many times, currency pair trades can be planned in advance by simply knowing the dates and times of data releases. Current events can also point out opportunities. Some type of technical analysis is needed, but those who trade currency pairs in binary options format can depend on market reports to highlight the prime entry points of the day.