3 Tips for Choosing the Right Asset for Options Trading

A quick look at any binary options trading platform will show you a list of at least 50 tradable assets. Some platforms offer as many as 120 assets to trade. You need to choose the appropriate asset to be able to increase your chances of benefitting from binary options trading. Here are three essential tips that can help you determine the best asset to trade.

1.  Leverage the asset’s behavior in the market place

Options can be categorized into stocks, currencies, indices and commodities.  All these react differently to economic, political, and social changes.

Additionally, the global financial market is highly intertwined so that an economic crisis in Europe could impact the value of the Euro or the US Dollar.

How can you determine the right asset to trade from the many diverse assets of stocks, currencies, commodities and indices?

You obviously want to trade an asset whose behavior you are familiar with or fully understand. A comprehensive knowledge of an asset and the way it reacts to changes in the market is definitely better than any trick, signal or shortcut. Whatever your background is, you want to make sure that you are trading something that you have a bit of experience with. Some traders may be very good at analyzing the Nikkei 225 in relation to the behavior of the Dow Jones, so this pair of indices would be the best for such a trader.

2.  Choose your preferred market

Assets that are very unstable usually thrill most intermediary and advanced traders. Currency pairs, for example, are very unstable and can have large swings in just a short time. On the other hand, indices fluctuate less frequently.

If you are excited about the prospects of profiting from unstable, high risk and high return assets, then currency pairs may constitute your best binary option. Binary options in commodities don’t have the characteristics of binary options in currencies because the underlying assets like gold, oil and silver etc. are traded in the future. This has the effect of reducing volatility. The same applies to indices, which are less volatile and have lower risk.

3. Choose an appropriate trading hour and time

Each financial zone (Sydney, New York, London, Tokyo and Frankfurt) has its own opening hours. It’s best to trade assets that are within a time zone that is comfortable for you.

You will certainly have a hard time trading the European stock indices if you are in Asia, and vice-versa because of the disparate time zones.

The best time to trade binary option currencies is while economic news is being released while the best time to trade binary options in stocks is when the earnings of the particular company you wish to trade are reported.

The truth is, no asset is universally good or bad; what you choose to trade will largely depend on what is appropriate for you at any given time.

 

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