Binary Options are unique because you have the entire trading universe at your fingertips. Unfortunately that can also lull you into a false sense of being comfortable in trading such a large group of choices. The reality is somewhat different; too many choices can also lead to a lot of confusion and chaos if not approached right. There are so many factors influencing each market, that you must go the extra mile to customize your trading experience. Your actions have to be designed for what you want and how you want to do it in the Binary Options World.
In this article we will figure out what markets make sense for you to trade and I will touch upon the seven-point checklist that can give you the best insight into how you should be picking markets that may work for you. In today’s environment people look to binary options trading as a low cost of entry with the biggest potential for gain, while the checklist can work for all types of trading, we will just focus on how this can work in the futures side of binary options trading.
7 point checklist:
1. Get a margin sheet of all of the tradable markets.
2. Understand initial margin and maintenance margin.
3. Figure out which markets have margins less than your account.
4. Learn minimum tick or point values of those markets.
5. Determine average true range to choose acceptable volatility.
6. Organize “short-listed” markets from least to most volatile.
7. Check the “open interest” for each market to find the most liquid.
Now let’s delve into finding a tradable market for you.
There are a little over 60 tradable markets in the United States. While the universe of futures and commodity contracts may reach into the hundreds around the world, they do not come anywhere close to the tens of thousands of stocks out there. That virtue alone makes it easier to wrap your mind around these markets-not as much information to sift through.
At the same time, it is vital to understand what you are up against. While stock prices can be clearly seen on their ticker symbol, the prices for commodities have no correlation to the amount of margin that is charged. A secondary problem is the fact that margins fluctuate based on volatility. The more active a market becomes, margins will fluctuate higher as a safeguard against speculation. The less active a market is, margins will fluctuate down in order to make them more appealing to trade.
Therefore, the only way to determine if you can trade one of the 60 tradable markets is to get an updated margin sheet. You can find an updated margin sheet on the web. Each market is listed, along with its margin and symbol. Every market is customized, and it’s important that you learn the details of the market you want to trade.
There are six categories that the markets fall under:
3. Interest Bearing
5. Foreign Currency
Pick a category, and then narrow your trading experience down to one or maybe two markets within that category. Often, I hear from stock investors that they don’t know where to begin when it comes to futures and commodities trading. These investors may have 15 or 20 years of stock experience, and all of the sudden they think they need to throw all of their experience out of the window.
The simplest way to pick a category is to look back at various types of stocks you have invested in over the years. If you found yourself in the tech sector a lot, look to the NASDAQ. If you enjoy mining companies, look to the metals or the energy sector. If you have a firm grasp of stock market dynamics, maybe you will follow the Dow Jones.
When all is said and done, focus on markets that already pique your interest. As long as they hold your interest, you will follow them and want to learn more. If you are the type of trader who is picking markets just for the markets’ sake or because of some technical indicators, when the market does something you don’t expect, you will be ill prepared to deal with.
Where our interests lie is where we will find our most joy. So even if you have never invested in stocks before, as long as you pick markets that you are interested in, your joy is what will sustain you when you’re losing in your trading. You will know how and want to figure out and research what is going on in the markets you have chosen. Like all human beings, when we know where to find answers, it reduces our frustration and adds to our ability to learn dynamically.
Futures are not new. They have been around in some form or another for hundreds of years. So, while they may be new to you, there is no excuse to ignore the tremendous amount of historical data and information that is available to help you learn from your mistakes. This becomes easier when you are looking at only a handful of markets that fit you and your trading style.
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This educational content was provided by Magnum Options with my approval as an affiliate (I respect their dedication and emphasis on trader education, especially in the new and emerging field of Binary Options).
A little about Magnum Options:
Established in early 2013, Magnum Options uses the latest technology for Binary Options traders. The broker is privately owned by investors with many years of experience in the online trading industry. The day to day management is handled by a team of experienced online trading professionals who have all been in the position of their users, and really understand the needs and priorities of both novice and experienced traders.
These professionals have assembled an educational team like no other that really focus on informing and educating all traders interested in trading binary options. Because of their expertise in the financial trading industry, Magnum Options has a refreshing approach to education, teaching people not only how to trade using a binary options account, but also how to use binary options with other trading methods to maximize profits.