Binary Options Review

Binary Options And Predictive Markets

Binary options markets operate as a derivative market of underlying assets, allowing traders the opportunity to buy or sell these at a specific strike price before a specific expiry date. They operate predictively, with the markets and returns adjusted to reflect the probability of the event which results in the financial returns for successful speculation. Prediction markets have been similarly used for a long time in creating a skewed market based on the probability of the outcome of an event. Commonly, these markets are used for sports, elections and any other competitive events in which the probability of something happening can be formulated as a return and exchanged within a market of participants.These markets reflect the trading communities view and anticipation of the outcome of the event by operating like any other market. When something is seen as high probability, the value increases, and when it is less likely, the value decreases. There is evidence that binary options share certain attributes of a prediction market, although there are others who point out that only some of the markets provided can be considered truly predictive. The binary options providers who create markets for sports and elections, for example, are seen as developing a predictive markets, whilst the range of financial binary options markets may be less so. The markets which offer flexible probabilities for options based on future events have been placed, at least by many US regulators, in the predictive market category.

The best times to trade binary options

Timing is absolutely essential for a trader’s success in any binary options market and for this reason it is hugely important to have a good understanding of those times which offer the best trading opportunities. Since most trading platforms offer 24-hour binary options markets to traders, this opens up the possibility of truly global trading with the prospect of chasing the sun around the globe, looking for the best trades and setups. Similarly, binary options are the only form of trading which offer markets throughout the weekend as well as day and night during weekdays.

Weekend binary options trading

Weekend trading using tools included by several of the most popular binary options brokers, including BankOfBinary.com, are those which traders can make predictions on events during the forthcoming week. These are often provided as ‘range’ or ‘one touch’ options, allowing traders to predict whether price is likely to remain within a given price parameter, or if it may experience volatility and ‘touch’ a higher or lower extreme. These innovations have not only allowed larger-than-average returns on these trades (up to 500% of the initial investment) but they have also built an increased flexibility for binary options traders who are unable to trade during regular market hours.The regular hours of binary options markets are commonly known as the times when stock, currencies and commodities are at their most highly traded. This will depend on several factors, including where the trader lives, which markets they are looking to trade and the type of strategy that they will be executing.In terms of geographical location, binary options markets transcend international time zones which makes it just as easy for a trader based in London to speculate on Japanese stocks as a Trader in Tokyo to trade UK companies using binary options. The central decision that the trader will have to make is at what time they want to be awake in order to undertake this. For those looking for a truly 24 hour diary of binary options trading it is possible to trade active markets round the clock. For many traders, however, trading selective markets during just one period of the day is both preferable and healthy.

Market opening times

The key binary options markets to trade can be described as the Asian market, European market and the North American markets. These three constitute the largest and most active concentration of traders and companies as well as the most influential global currencies. The stock markets signify the regional opening and closure of these markets in this order with the Asian market opening at midnight GMT until around 9am GMT. As the sun moves around the earth, this is then followed by the European markets opening at 7 and 8am GMT depending on the precise time zone of the stock market within Europe.The world’s largest financial market then opens at 1pm GMT and trades through to 10pm GMT. Having identified the three largest markets it is important to note that there are several smaller markets which will open and close between these times. For those wanting a truly global account of the active markets, the Pacific region, which includes the Australian and New Zealand markets, opens between 10pm GMT and 7am GMT.Identifying the opening and closure of the world’s largest stock markets is a good basis for all traders to decide which binary options markets they are likely to trade. Since these are considered the official market hours, or the periods when the most market activity occurs, within these regions it will be the time when stocks, local currencies and some commodities will be at their most volatile. Since volatility is helpful, but not essential, for binary options traders, these times will be the best periods to look for high-probability trade setups.Given the 24 hour nature of global financial markets, it is important to point out that many markets remain open beyond the stock market opening and closing bell. Currencies, for example, will remain active as different pairings become popular to trade as local times move through the day. It is also important to point out the unique way in which traders can use binary options markets differently to traditional forex and currency traders. Whilst these traditional ways of trading can be used effectively whilst markets are active, their reliance on volatility in order to allow traders to make profits beyond the commissions and spreads that they have to pay make trading outside of market hours unattractive.

Advantages of binary options outside market hours

Since binary options markets do not charge commission or apply spreads to their options this makes trading these outside of market hours much more viable. Furthermore, binary options importantly does not necessarily rely on volatility, with an expiry only required to be fractionally higher of lower than the strike price in order to be considered profitable. Therefore, overnight and so-called ‘quiet’ or ‘sideways’ markets can be traded effectively with both regular binary options and also using features such as the range options offered by some platforms.Binary options markets, as derivative vehicles of the underlying markets can therefore be seen as increasing the flexibility of traders to choose precisely what time is suitable to trade. This turns the traditional image of the 9-5 trader on its head and allows those trading binary options markets to take advantage of opportunities that exist within and between traditional market trading times. This is a good reason why many trade binary options over non-predictive markets and, with the number of underlying assets available to trade growing as platforms become even more competitive it offers an excellent way to access global markets and around-the-clock trading.

Trading during the market’s opening

Trading binary options markets during regular market hours in any geographical location itself opens up several trading opportunities within that particular market. Throughout these, the opening minutes of each stock market tend to be both the most volatile and often the most popular amongst short-term binary options traders. This is the time of day that will dictate the direction of the market and is also one of the periods where the most activity occurs and out-of-market news are built in to the stock price. For this reason it is an important time for many binary options markets and a period where a large number of profitable opportunities exist.Whether a trader is purchasing sixty second or end-of-day binary options, the first few minutes can be critical in determining the success of the trade. Specialist traders use a number of strategies during the market opening to pinpoint opportunities including those looking at where the market opens relative to its previous close. For individual stocks this is important as the tendency for markets to ’gap’ up or down from the closing price allows binary options traders looking to ‘close the gap’ (the market tends to fill these gaps shortly after they have been created) a high-probability setup in the first few minutes of trading.Across both currencies and commodities, the connected nature of all markets ensures that the opening of the stock markets influences the values of both of these. Demand for commodities is created by the individual companies which make up each index and the way that these are paid for is determined by the currency markets. Additional relationships exist between binary options markets which also create trading opportunities which become available at the market opening in each particular location.

An example of market interconnection

One outstanding example of this is the connection between the US Dollar and Gold, both considered as ‘safe haven’ investments when uncertainty afflicts global markets. If trading activity opens in the US with a negative expectation (often due to a large deviation between the previous and forecast values) of either employment data or GDP levels, both the US Dollar and Gold often gain strength throughout the trading day. This also has the knock-on on effect of influencing the opening of other markets and especially the opening of Asian and European markets the following day. Binary options traders can therefore take advantage of this by observing the regional performance prior to the opening of the markets that they will trade in order have a good idea about the direction of the opening few minutes.

Trading during the market’s closure

Binary options markets also allow traders to take advantage of the frenetic trading that can occur during the stock market closure. In a similar way to the market opening, this is the period of time during which many professional and institutional traders are closing their positions and looking ahead to the next day in terms of their exposure in the market. For binary options traders who seek trading opportunities within volatile trading conditions this can often lead to some exciting opportunities. Stock market closures also have the added benefit of overlapping closely with the opening of markets within another geographical region which adds further interest to traders.

How the US affects European markets

For example, the stock market in Europe closes within a few hours of the US opening, allowing for binary options traders to benefit from opportunities from stocks within both regions. As the largest economy in the world, the US will often also have a large influence on the trading day of European markets and volatility from Wall Street will quickly be passed on to the individual European binary options markets. It is worth remembering that, if the last few minutes of the stock market also coincide with a news release either domestically or in another market, it may result in a highly volatile end of the day creating both opportunities and a reason to be cautious for those with open positions in binary options markets.

Timing for stocks

As outlined above, trading stocks through binary option markets will be most effective whilst the specific market is open. However, there is also a reasonable amount of activity immediately after market closures and even some important news releases which can also affect the next day’s opening. Since markets are also interconnected globally, it is important for binary options traders to be aware of the performance of other stock indices in order to anticipate movements in the preferred market. Many binary options traders will prefer to ‘day trade’ stock binary options due to the fact that events can occur outside of market hours which may adversely affect the opening and expiry of longer-term trades.As a derivative market, binary options allow traders to speculate on the direction of a stock market as a whole through purchasing binary options based on the entire index. This is often preferable for traders to purchasing individual stocks as it gives a more general reflection of market sentiment and thus market direction. The main index markets are available to trade with bot.192.168.1.143.xip.io and, similar to regular binary options, they only require the index to close higher or lower by one point in order to be profitable.

Timing for currencies

Currency markets are open 24 hours per day and generally from Sunday evening to Friday evening. This incorporates the entire active trading week for retail binary options traders. However, as we all know, currency markets actually never sleep with exchange rates constantly floating higher and lower regardless of the day or time. At the same time, weekend is traditionally a time when the large industrial speculators and institutions are not operating, so the market is likely to be very quiet. During the week, binary options markets for currencies are open throughout the day and night. During the stock market trading hours of one of the currency pairs there is likely to be much more movement for binary options traders looking for volatility trades, especially between the major currency pairs.

Major and minor currency pairs

Currency pairs are generally divided in to both major and minor pairs, depending on their global importance and the degree to which they are used by international banks and reserved. Heavyweight pairs generally include the US dollar, Japanese Yen, Euro and British Pound as the most popular. These currency pairs will trade against one another most actively during the time when one of the regions is awake and actively trading during stock market hours. The most currency activity comes from the European and US trading hours and, for this reason, most non-Yen pairs will be very quiet during the Asian trading session. However, as we have already noted, binary options markets do not rely on degree or volatility to be profitable and the freedom from prohibitive spreads allows binary options to be purchased over night with the success of these trades only dependent on a one pip higher or lower move.

Timing for commodities

The binary options markets for commodities are also truly global markets. These largely rely on the supply and demand of the commodity so the most important trading times for these will where they are most heavily bought and sold as raw materials. For construction-related commodities, such as steel and copper, the Asian market is especially important as a powerful driver of demand to satisfy the demand for building and development in the region. Similarly, oil is incredibly sensitive to the performance of the wealthy Western economies and also the political situation in the Middle East.It has already been seen that gold is sensitive to global economic data and this is also very true of all commodities in general. When economic data is positive, the demand for energy and raw materials is assumed to rise which in turn increases the value of these commodities. Similarly, if a natural disaster or war threatens to interrupt supply then the value will rise. The opposite applies when the data is negative or if too much of a commodity is available on the market.The outcome of the interconnections between the economy and commodities for binary options markets mean that they can be traded throughout all market hours. Again, since many of the World’s largest financial centres are concentrated in Europe and North America, regular trading will be most active when these markets are open. However, commodities are highly sensitive to breaking news which can occur during any time irrespective of market hours, potentially causing a spike in the price of the affected commodity and opportunities for binary options traders.

Timing for index futures

Index futures are at their most volatil in the hours preceding the opening of the respective market. The very notion of futures is based on speculation and intense analysis on which way the market will be most likely to head during its opening. Index futures are often higher or lower that the actual close of the index due to this predictive element. They encapsulate the market expectations of traders and analysts and provide a good guide to those trading binary options markets as an estimated direction for the opening of the global stock markets.

Summary

Binary options markets are truly global and operate around the clock. The region where a trader lives or their preferred regional market to trade binary options will determine the available opportunities in terms of active currencies, stocks and commodities that are available. Unlike traditional stock and forex markets, binary options do not necessarily require volatility to be profitable and they can be traded effectively during flat and sideways markets as regular options or using the range trading features provided by bot.192.168.1.143.xip.io.For those traders wanting to trade binary options markets during volatile periods, however, it is recommended to trade within stock market hours to capitalise on the best trading opportunities and setups. These hours follow the sun around the globe each day and typically operate between 8-5pm in most regional markets. Within this, some of the best trading occurs at the opening and closure of each trading session, with frenetic trading providing some great binary options trades especially across the currency and stock market indices which are comprehensively available through bot.192.168.1.143.xip.io.

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