When you decide to trade binary options, your next natural step would be to explore the types of assets that are available for trading. The best binary options brokers will offer you a wide range of assets so you can maximize your winning chances depending on the assets that appeal the most to you. You can trade many different types of assets in binary options, all of which fall under four main categories:
Stock trading is popular among most classic investors. But many binary options brokers are now offering stock options. A major advantage of choosing to trade binary options with stocks is that there are so many stocks to select; you could never run short of stocks!
In the same way that conventional stock trading requires the trader to master a certain type of stock so should a binary options trader. So for example, you can start by familiarizing yourself with stock in the retail sector or in the technology sector and then venture out into other categories of stock options as you improve your trade. Examples of stocks include Apple, Nike, Google, Wal-Mart, Facebook etc.
Indices are a group of stocks lumped up together. Indices are a great way to diversify your investment—instead of focusing on a single stock; you can trade more than one so that if one stock does not perform particularly well, other stocks that perform well within the index will counter the poor performing stock.
Examples of indices include Standard & Poor 500 (S&P 500) which lumps together the top 500 companies in the US, the Dow Jones Index groups together the largest 30 companies in the US, while the DAX Index groups together the 30 top German corporations trading on the Frankfurt stock exchange. These are just a few of the indices available worldwide.
You may also come about future indices—these are simply a variation of the existing indices that allow you to make long-term predictions, sometimes as long as 3 months into the future instead of making short-term or immediate predictions made on prevailing market conditions. Indices are certainly better suited for more experienced traders who understand market conditions.
Commodities are the asset of choice for most beginner binary options traders because they are low risk. Examples of commodities include oil, gold, silver, copper, lumber, natural gas etc. Including commodities into your portfolio is a good way of spreading out your risk and cushioning yourself against any significant losses. Commodities are less volatile compared to other types of assets such as stocks and currencies. However, it is important to realize that in binary options trading, the risk for trading commodities is generally higher than it is in classic commodities trading.
Forex trading is perhaps the most popular among classic investors and binary traders. Forex exchange, also known as FOREX entails comparing two currencies against each other to determine which currency would be stronger than the other one.
In binary options trading, these two currencies are aptly referred to as currency pairs. Examples of currency pairs include USD/EUR, JPY/EUR, GBP/USD and so many more. Forex trading is much easier to understand compared to trading other commodities, so this is naturally a great starting point for new binary options traders.
The more familiar you are with any of these asset types, the more accurate your predictions will be when trading binary options and therefore, the greater the profit potential.
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