When trading binary options you’re likely to hear the term volatility used quite often. Some traders love volatile price movement, while others loathe it. Keep in mind that volatility can take on different meanings with different types of trading. How you deal with it can make all the difference in the world between whether or not you become a highly successful trader.
When participating in conventional trading, volatility can be frightening since the term is usually used to describe some downward movement in associate to asset price. When you have purchased stocks or other assets, this is the last thing you want to hear. When trading binary options the meaning of volatility is quite different since traders need not fear downward price movement. This type of price movement is just as profitable as upward movement.
Don’t mistake volatility for unpredictability. Yes, the term can refer to price movement that is bouncing around, but most often it is linked to a higher degree of price movement. With certain trade types (such as One Touch), a higher degree of price movement is going to be necessary in order for a trade to finish in the money. In all cases, some degree of price movement is going to be required so that the trade does not result in a tie, or at the money.
If you do fear volatile market conditions, remember this – options broker will allow you to sell open trade positions via the Sell feature. Should you notice that the market is moving against you, you’re free to sell the open option and salvage some of your investment amount. Should the market be moving as you anticipated, yet you fear the possibility that the asset price could reverse, you still have the option to sell. The difference here would be that you would be locking in some profit instead of minimizing a loss.
Overall, volatility is nothing to fear when trading binary options. Active asset price movement is more often than not a good thing. If you’re going to earn money from a trade, the asset price has to move away from the entry or strike price. It’s as simple as that. With One Touch trades, significant price movement is often needed in order for the trade to yield a profit. This is why the return rates on these trades can be as high as 650%.
So the next time you read that the markets you wish to trade within are volatile, don’t automatically run screaming from the room. Instead, embrace this market condition and exploit it. With just a little practice you should be able to transform this type of price movement into large profits in your binary options trading account.