As you have probably guessed, there are a lot of things in the world of binary options that you won’t encounter with any other type of trading. And many of the similar concepts might have different meanings here. Some binary options brokers do have glossary of common terms that you need to be familiar with in order to be successful. Here, we will take a look at some of the more common unique concepts and explain them so that you are not wasting your time later trying to figure things out.
Timeframes in the Market
The first concept you need to master is that of closed ended trades. In the binary options industry, this is called the expiration date, or the expiry. The expiry is how long before the trade ends. If you are trading 60 second expiries, you have 60 seconds once you execute the trade for it to stay open. If you finish “in the money” you will see full profits. If you don’t, you lose what you had risked.
Different timeframes suit different traders and different trading styles. For example, a trader that thrives on action and making quick decisions will find that the shorter term trades are more beneficial to them. There are some expiries that go down as short as 30 seconds. Some traders need more time to make their decision, and longer amounts of time to be sure that their trades will be profitable. Long term options go as long as a year out, depending on the broker that you use. You can find almost any length of time in between these trade timeframes.
Remember that shorter timeframes are often more unpredictable than longer timeframes. Really, though, it’s the quality of your analysis that will play the largest role in this. If you are thinking through your trades and putting the right amount of research into them, the timeframe will be your friend, and not something causing you to lose money.
Types of Trades to Take
There are a lot of different types of trades in the binary options business. The typical call and put trades are the most common. Call options are for when you think the price will go up, put for when you think it will go down. That’s simple enough. But you also have boundary trades when you are given a range of numbers and need to predict whether or not the price will be inside or outside of that range come expiry. There are one touch trades, where you are predicting whether a given number will be reached at any point during the life of the trade. There are also pairs, which work much like a Forex pair, but compare two unrelated assets, such as Apple’s stock and the price of gold. Whichever gains the most before expiry is the correct choice.
You will also find things like ladders in your trading experience. Ladders allow you to link more than one trade together, and what you are paid depends upon the success of multiple trades, and not just one. This is sort of like a parlay, and not really something that serious traders should be considering unless they have enough expendable money in their account that they don’t mind losing some on an extremely risky move.
There are many other terms, and some will even vary from broker to broker, yet all try to describe the same thing. In short, it’s important that you spend time exploring a broker before you start using it. You need to know what the strange terms mean if you want to be able to use them profitably, and the best way to do this is through experience.