Unlike stocks, commodities and Forex markets, binary options trading is not limited to a single type of asset. In other words, when you are trading binaries, you can choose your preferred trading instruments from a wide range of assets. Nevertheless, it is not always easy to find the best ones. In this article we will show the path you should follow in order to determine the most fitting assets for yourself.
Typically traders are looking for the assets that are the cheapest to trade. This is where the spreads come important. However, this is not the case with binary options. The only trading condition you should be paying attention to is the payout. When trading simple binary options (put / call) you will be getting a payout between 65% and 95%, depending on the likelihood of the outcome. This rule of thumb here is pretty simple – the higher the payout the better for you.
This is pretty self explainable. If you get a 100 USD option with a payout of 65%, your profit will only be 65 USD. With a payout of 95% you will get 30 USD more income. However, it is always safer to get an option that confirms your market overview than to hunt for the maximum payout.
This is, perhaps, the most important factor when determining your best choice of a trading asset. Stocks are more predictable, yet it is quite possible to experience almost no intraday movement on these assets. This is why Forex trading products come as a better choice, as it is frequently possible to observe the currency pairs move for 100 pips or move within a day. Same is applicable for precious metals. The rule here is simple – look for the assets that are volatile and, at best, are moving within a trend.
When you are getting an option for the asset that is unlikely to move, the whole binary options trading becomes a coin flip. You don’t really want to lose money when the asset has moved just for a few pips from its base value. This is why you should look for the assets that are likely to significantly change the price within the option expiration period.
Last but not least, go for the assets that are easier to predict. There are quite a few methods that you can use here. Most probably you have already heard of fundamental and technical analyses. Well, this is exactly what we are talking about. When it comes to currency pairs, it is pretty easy to predict the changes in the rates based on the fundamental analysis, especially when the news have just been released. It is pretty obvious. The more importance the currency has for the global economy, the more likely it is to have a larger amount of fundamental events contributing towards the fluctuation in its rate.
This is why you should pick up the assets that have some macroeconomic data releases of a major importance assigned to them.
Summing it up
Choosing your prefered trading asset for binary options is vital. When you are combining high payouts with the necessary degree of volatility, be sure that you have the knowledge to predict the currency rates. If all of these factors are in place, the chances of your success in this market are high.