When to Trade in Binary Options?
Binary options trading makes use of all traditional assets like commodities, stocks, currency pairs and indices. Each one of these assets have their respective financial exchanges where they are traded 24/6. As a result, those trading in binary options will also have access to these assets 24/6 for trading. However, what really differentiates options trading from traditional asset trading exchanges is that people can trade in binary options for 7 days a week. So logically the question that follows is, when each individual traditional asset can be traded only 6 days a week, how come binary options allow trading 7 days a week. This is possible because of the different time zones. Different exchanges are located in different time zones which take care of the extra 24 hours of trading that is possible in case of binary options trading.
Now comes the question, ‘when should someone trade in binary options?’ Because options trading is allowed 24/7, it essentially boils down to the fact that it can be traded anytime during the day and any day during the week. There is no time binding of any kind. However, those who want to make some serious money, they will always target specific times of the day. These traders will always look for the times when the markets are most volatile with maximum liquidity and maximum risk. Volatility refers to the situation when buying and selling of assets are at their maximum. High volatility is possible when markets in different time zones overlap and the same assets are traded across markets throughout the world. This is not possible for all assets. Some assets can trade only locally while others will trade globally. For instance, a startup company will not have global presence but it can be big enough to have its stocks traded in the local stock exchange. Same way, Google is a global company and its stocks are traded throughout the world. Everyone in the world will like to buy a Google stock. So, what happens when two or more different markets that allow trading in Google stocks overlap? Traders in all those markets will have access to Google stocks at the same time and the buying and selling activities for Google stocks will increase significantly. What happens then? Everyone will want to buy Google stocks and the value of the stock is driven up. As the value of the stock goes up, the traders will start selling them to realize more profits and as people start selling, the supply of Google stocks will increase and the prices will start falling. As price goes down, people will want to buy more for potential future profits and this will drive up the demand and hence the prices will go up again. This is a continuous process. So, the Google stocks become extremely active when different time zones overlap leading to more liquidity and more risks. This is true for all assets traded globally.
Since different assets have different trading times in different exchanges, the overlapping period will be small but the chances of making high profits during those overlapping periods increase significantly. A simple rule of Economics states that higher the risks, higher are the potential gains. So, if you are looking for big profits, you must trade during high risk period, i.e. when the time zones overlap. If you don’t mind taking high risks, you must do some intensive study about the trading hours of each asset you want to trade in and find out when the global market becomes volatile. For this, it is very essential to study the assets and their individual trading hours in different markets. Now let us take a look at the individual assets.
Stocks: Stocks are traded for a minimum of 6 hours and maximum of 8 hours a day. Stocks for any non-US company are traded in American stock exchanges as American Depository Receipts or ADR. So, in case you want to check the trading hours for stocks of those non-US companies you can consider US markets as benchmark between the trading hours 9:30 AM EST to 4 PM EST. However, it is never wise to forget about the major European markets because when you are trading in binary options, you can take advantage of the other markets apart from US market.
Commodities: Most active trading times for different commodities differ. Silver and Gold for instance are very active between 8:30 AM to 5:15 PM EST while Oil is very active during 9:00 AM EST to 2:30 PM EST. So, if there is any particular commodity you prefer more than others, you can always do some research and find out the best time to trade in that commodity.
Currencies: Forex markets are extremely volatile when the markets in different time zones overlap. Your best bet will be London/Asian time zone overlap and London/New York time zone overlap. Even though the preference should be to trade during the overlapping time zones, you must still concentrate on the local currencies of the time zones that overlap because they intend to be more volatile than foreign currencies.
Indices: As a rule of thumb, it is always better to trade in indices as per their relevant exchanges. For instance. NASDAQ100, DJ300 etc. are best traded in US market trading hours but if you prefer DAX30, go with German market trading hours.
Irrespective of the time and market you select, you must always remember that if you enter the market 5 minutes before its closing, you will not be allowed to trade. This is by rule and hence, you cannot do anything about this. Make sure that you enter market early in order to be able to trade.
What to Trade in Binary Options?
Binary options is based on all traditional assets which include stocks, indices, Forex and commodities. So a trader is free to trade in any asset of his or her choice. However, the major problem is that every trader is not an experienced trader. So, all asset types are not good for everyone. Some assets are riskier than others. The rule of thumb for any new trader in market is to first study the assets and select an asset that they are comfortable with. Trade Options suggests new traders to start with indices because they are more predictive and they are better traded during their relevant market trading hours instead of overlapping time zones as described above. However, this is a personal choice and a trader is always free to trade according to his or her risk appetite. Also for new traders, it is imperative that they stick with one and only one asset. Trading in multiple assets can get confusing and hence, it can lead to enormous losses. If a new trader has some prior knowledge about a particular asset, he or she must consider trading in that particular asset because they will find it easier to understand the market behavior of the asset. We repeat that we can only give suggestions and the final decision always rests on the trader.