Day trading binary options
What is Day Trading?
Binary options are a price prediction contract that stipulates the term of the contract. Binary options have a fixed profit, which is known in advance, and the profit is only accrued when the contract conditions are met, it ranges from 60-90% depending on the contract conditions and the broker. The main condition is to correctly predict whether the price will rise or fall.
If you have bought an option with a rising condition and at the end of the period the price rose, i.e. the condition was met, then you get your investment and profit. If the condition is not met, you lose your investment.
Binary options are very easy to interpret - there is only one condition for the trade - the price will rise or fall in a certain period of time. If the condition is met, you earn income.
There are 2 main options in total: Call and Put. The trader opens the first option, it is also called "Higher" if the price is predicted to rise. With a put option, it is the other way around. It is bought when the value of the asset is expected to fall. In addition to the basic options, there are other options. They are much less popular than the first ones, as they are a little more difficult to use. These options include:
- One-touch. The trader must predict if the price chart will cross a certain set value. For example, an asset is worth $100. The trader makes a bet that the asset will touch a value of $101. If it happens at least once before expiration, you win.
- Range. The principle of action is the same as the previous one. However, a trade should be opened here if the trader thinks that the price of the asset will not go out of the range by the end of the expiry period.
- Ladder. This variant can bring up to 600% of profit in one deal. It is necessary to show in which direction the price will go: up or down. Also, several additional lines are displayed on the chart. If the price crosses the first one, then you make a profit. If the second level is crossed, the percentage value increases. And so on. That is, the passing of each subsequent level increases your profit.
These are just the most popular binary options, you can choose between easier and more complicated ones, according to your free time and temperament. Experienced players say to start with the easiest ones.
Trading is divided into several categories depending on the degree of activity.
For example, scalping involves making multiple trades within an hour or even a minute. In day trading, binary options dealers only make transactions on the current day. Long-term commerce involves making only a few trades a week or even a month. The most successful and productive are the intraday styles.
Essentially, intraday binary options trading is buying and selling financial commodities on the same day, without carrying over to the next day.
Intraday binary options trading is a dynamic form of investment. Although it is a high risk investment strategy, it can be very profitable if managed correctly. Intraday traders can use many methods. The best ones are technical and fundamental analysis. Their advantage is that you can use not only charts and indicator methods, but also observe the dynamics in a wider range of changes. Stability comes from being able to anticipate events more accurately, as you have more time to analyse the market situation and a more accurate signal of your chosen strategy.
In day trading binary options players are aided by the tools given by the broker: indicators, charts, analysis strategies, world news. When all data is taken into account, the forecast is the most accurate and allows multiplying profits.
For successful day trading in binary options, it is better to have volatility in the market. Price volatility is an intraday trader's friend. Therefore, you should choose assets that are currently fluctuating a lot. The publication of economic news can lead to dramatic price movements. They should be monitored constantly, using the most significant moments in commerce.
Price charts are also a key reference point. You should be able to analyse them to determine entry and exit points. All methods available in trading are used for analysis. These include looking for chart patterns, using indicators, and working with support and resistance lines.
Technical analysis for binary options day trading
The technical study of options is defined as the use of charts to predict patterns and price trends. This includes the use of indicators to identify commerce opportunities and make informed decisions about the best entry or exit points for a trading position. For example, the candlestick chart is an extremely popular tool for day trading binary options among players of all levels.
Japanese candlesticks are very informative and can by themselves tell a lot about a trend without the use of additional indicators.
Each candlestick consists of the following elements, reflecting the change in the value of an asset over a certain period of time:
- The opening price of the asset for the period.
- The highest price for the period.
- The lowest price for the period.
- The closing price of the asset for the period.
Other types of charts are:
- The line chart is the simplest type. This chart shows the closing price for a particular period. You may track the trend on it;
- Bars. This chart is more informative compared to the line chart. Bars are a series of vertical lines, each illustrating price changes for a certain period of time. It contains data similar to a candlestick chart, but it is considered less visually comprehensible than candlesticks.
If the chart options are reduced to three main ones, there are dozens of analysis indicators. There are even more strategies which are based on these indicators.
As a rule, traders use one to three different indicators simultaneously in order to get a more accurate signal.
As each indicator in its turn filters out false readings of each other. Here are the most commonly used algorithms:
- Moving Average, which is an average of the asset's value over a period of time you choose.
- MACD consists of 2 moving averages. One of them is fast and shows a short term trend and the other is a slow moving average reflecting a longer term trend. By the behaviour of the moving averages, a trader can determine whether the market is in a bearish or bullish trend.
- Bollinger Lines. The algorithm is based on three moving averages. Two of them are located on either side of the central one, forming a price channel. Its width indicates volatility in the market.
- RSI indicates a trend reversal or sustained continuation. The RSI line is enclosed between 30 and 70 - it indicates the current price level. If the price is above 30, it is oversold and buying is imminent, indicating a trend reversal. The 70 level indicates that it is clearly overbought, which means that selling is imminent, and the trend will change direction.
- The Stochastic Oscillator is situated underneath the chart and consists of graded scale from 0 to 100 and two lines: main line and signal line. It may be used for fairly accurate prediction of price reversal. It is very important for the tool's lines to cross the 80 or 20 level, which will already indicate to us the formation of potential overbought or oversold conditions in the market.
Technical analysis is predicting the long-term behaviour of asset prices by using specific technical signals, trend lines, bases and tops and other such things.
Remember that any analysis is only a clue, and they cannot predict 100% what will happen next, so there is always a risk. But the more you practice, the more confident you will feel on the platform and the faster you can make decisions. We advise you to practice on the forex platform using a demo account, it will give you all the benefits of the terminal but will not require you to deposit any cash. This is really useful, so you can get a feel for how much you like trading options.
How to start day trading binary options in Somalia?
A brokerage website is a great way to begin trading binary options in Somalia. It is a trading platform where you need to register and then create a virtual or live account. Then start trading. Registering will also give you access to indicators, charts, training videos, live chats with traders and a functional mobile app. Trading online is easy!
A demo account is convenient and straightforward for any beginner, and especially appealing and valuable is the fact that it requires no money.
That is, you select the menu "demo account" and a virtual amount of money appears automatically, which you can use at your discretion. Buy options, stocks and learn to read and understand the indicators. Make a bet based on one of the strategies, and see if you interpret the information you receive correctly. It is very exciting and, if used correctly, will make you money later on.
Once you understand how to correctly handle the tools of commerce and the terminal, and you have accumulated initial capital, you can open a real account and start investing in the selected asset. Remember not to invest big money at once in your first real bet. You should always start small and get lucky!
So, when investing in day trading binary options, be sure to work with the economic calendar. The release of important news at the moment can make the market explode, and the price go in a different direction from what was predicted. Conversely, before the release of data, the market weakens and volatility decreases. During these periods, it is best not to open trades.
If you trade binary options intraday, you have to be ready to make a quick decision, because it will determine whether you will make a profit in a few hours or lose everything.
To be able to make a quick decision, it's better to focus on one single asset, or pair, so that you can open trades that are really profitable for you.
In order for binary options day trading to be successful, you have to set yourself financial limits first. All you have to do is to set yourself a clear boundary on the amount of money you win and lose.