Binary options are exotic, complex trading options, which is relatively simple to implement and understand when compared to other traditional trading mediums. One of the most familiar tools that I prefer to trade because of its underlying assets and security are indices. Defined as the statistical measure of the fluctuating stock portfolio, an index is a representation of the overall market.
Most of the indices tend to weigh market capitalization of a particular company, where if the cap is $1,000,000 then the value of its residing stocks would be $100,000,000 where the company will be 1% owner of the index. Such type of systems is made easy by binary options, where market value is calculated every minute, ensuring that traders make the most of it.
When you are new to the world of trading indices with binary options and are not aware about the way it works, then here are the certain factors that you must look after. These factors have helped me in placing accurate trading orders maximizing my profits.
Credit Rating Upgrade/Downgrade
The credit rating is a representation of the value of an index, where higher value indicates an upgrade and lower value reflects a drop or downgrade. Such a ratings are often provided by credit rating agencies that consider several aspects of the index including fundamental and technical analysis and then come up with a precise rating. These ratings have remained to be highly beneficial during my journey of trading indices with binary options.
Gross Domestic Product
The Gross Domestic Product or GDP is an incredible indicator of the present economic scenarios. Where rising GDP means a growing economy, while falling figures portray that it is not in such a good state.
Depending upon the sector of indices that you select for trading, you can relate the GDP for
- Geopolitical situation
- Corporate Earnings Reports
- Manufacturing Data
- Outlook of global economy
- Housing Data
More or less, GDP has a strong hold over indices, and is a powerful element that should never be neglected.
What I Learnt From My Trading Journey?
What I felt is, for novice traders trading indices can be both confusing and overwhelming at the start, as this is the period when one is not aware from where to begin. Yet again, the simplified approach of binary trading makes the entire process extremely convenient.
Still, there are a few things that traders should have in their mind
- Not every news that you are going to come across is going to affect the value of indices. The importance here must be given to the way the trading community will perceive it, because they are the real driving forces.
- Have a look over the various components of indices. Those with a value of 30 stocks are easily impacted compared to 500 stocks
- Examine the nature of market that is being measured by the index. Take an account of the history, to realize how they have behaved earlier.
- Never forget to note the trading hours of a particular index, as there are some that can be traded only within a stipulated timeframe.