You can trade binary options using a wide variety of assets, of which there are more than a hundred. But at the same time, we recommend that you choose just a few and study their market behavior characteristics, as many professional traders do. But how do you choose the best options? To begin with, learn about each type of asset.
There are only 4 main categories:
- Currency pairs;
- Actions;
- Produtos de base;
- Indexes.
The first are the most popular, so let’s start our analysis with them.
Currency pairs
It’s an asset in which one currency acts as a commodity, or more precisely, 2 currencies, for example EUR/USD (euro/dollar), USD/JPY (dollar/yen) and so on. In the first position is always the base currency, which you want to buy, and in the second position, the quote currency, which displays the price of the first. Simply put, this is the relationship between the currencies that are included in the asset, i.e. in the EUR / USD pair, you’ll see how many US dollars you’ll need to buy 1 euro.
Currency pairs are conventionally divided into 2 types:
- The main ones are those containing the dollar. 75% of trades are carried out on these types of pairs;
- Cross rates – no dollar in the pair.
You’ll notice exotic pairs, but be aware that hardly anyone uses them.
Why are currencies more common in binary options? These types of assets lend themselves better to analysis and are also highly dependent on economic and political news. Therefore, predicting the subsequent movement of a currency pair is much easier than predicting the following assets.
Actions
The oldest type of asset on the financial market is now available to everyone. Google, Apple, Microsoft, Gazprom – you can make money on the shares of these and other companies in binary options, even without buying them. All you have to do is predict their price movements.
The characteristics of stock transactions:
- There is no need to buy shares;
- Profits can be made either from a rise in price or a fall in price;
- Its value can seriously increase during crises.
News about companies and the economy as a whole is often used to predict the movement of share prices.
Produtos de base
This asset class includes raw materials and resources that are frequently supplied and traded. These include:
- Metals – gold, silver, ore, etc;
- Food products – coffee, rice, sugar;
- Raw materials for energy – oil, gas, coal.
All types are divided into soft commodities, which are grown, and hard commodities, which need to be mined.
Now let’s take a look at how commodities can make a profit during trading. The first way is to predict the price movement. But it’s extremely difficult for beginners to do this, as they need to fully master the elements of fundamental analysis.
The second way is to monitor the price of an asset and draw conclusions. This is simple. The fact is that some countries’ economies are highly dependent on the export of raw materials. Take Australia, for example, whose currency (the Australian dollar) is highly dependent on the price of gold, as the country is one of the most important producers of this metal. If the price of a jewel rises in the world, then more Australian dollars will be needed to buy gold. Therefore, you should expect an increase in the price of this currency.
Indexes
Perhaps the most difficult to understand for novice traders and, as a result – the least popular. Still, we can’t forget about it. A stock index is a certain position on the stock market, which is calculated using a special method, based on a basket of common stocks (the most liquid) or bonds. With their help, you can generally assess the state of the stock market and better understand the timing of the economic cycle.
The most popular indices include:
- FTSE-100 – reflects the share price movement of the 100 most liquid companies on the London Stock Exchange;
- Nasdaq-100 – includes 100 American and global companies whose share prices are displayed on the Nasdaq exchange;
- Dow Jones-30 is the weighted average of the share prices of 30 industrial companies on the New York Stock Exchange.
Now you know what each asset group looks like. We hope that the information provided will help you choose the most suitable trading instrument. Happy trading!
