A short glossary of the basic terms of binary options
- VFX Blog
- For beginners
A huge number of people in the world are engaged in trading, but less than 10% of them do it professionally. Unwillingness to learn, lack of elementary theoretical knowledge is a guarantee of the failure of a beginner trader's career. Those who are serious about binary trading and strive to achieve their goals through hard and hard work manage to stay at the top.
Where should a beginner start? Start your journey by learning common terms, concepts, and basic definitions of binary options trading.
We present you with a short glossary of the basic terms of binary options.
A binary option is a digital contract with a fixed profit, which assumes that one party will pay the other party a predetermined amount of money if its financial forecast for a particular asset is fulfilled after a predetermined period. Binary options give you the opportunity to immediately see the size of your expected profit or loss, moreover, the trader has the right to choose the time during which the execution of a particular option should occur.
CALL - a binary options condition under which the asset price should rise. If you think that the price of the underlying asset will rise, select the CALL condition.
PUT is a binary options condition under which the asset price should fall. If you think that the price of the underlying asset will fall, choose the PUT condition.
An asset is a financial instrument for trading, for which a trader makes a forecast. There are the following main assets of binary options: currency pairs, stocks of global companies, commodities, and indices. When choosing an asset, it is important to correctly calculate the future movement of its price, which means, to make a correct forecast and get your profit.
The currency pair is one of the most popular assets for binary options trading. A currency pair is designated by abbreviations of two monetary units, the first of which is called the base currency, and the second is the quoted currency. For example, in the EURUSD currency pair, the base currency is EUR quoted by USD.
The vfxAlert app generates signals for the most popular forex and cryptocurrency currency pairs. Customize filters for easy analysis of the required assets in the application settings.
A signal is a forecast recommendation based on statistical and historical data. Traders use signals to confirm their own strategy as an additional analysis tool.
The multifunctional structure of the vfxAlert signal contains all the information necessary for making the right decision, including statistical data on the success of similar signals in the past.
A quote is a price to be paid in the quoted currency to buy one unit of the base currency. The quote is indicated after the name of the currency pair after the "=" sign. For example, the quotation EURUSD = 1.1600 in simple words means that to purchase one euro, you need to pay $ 1.16.
A point is a unit of change in the price of an asset. For example, when they say EURUSD = 1.1600 has risen by one point, this will mean that EURUSD = 1.1601
The strike price is the value of the asset at the time of buying a binary option, from which the further direction of the price will be calculated.
Trading session - time intervals in which exchange trading takes place on different continents. Distinguish between the American trading session, European, Asian, Pacific. Knowing the schedule of trading sessions is a prerequisite for successful trading because each region of the trading session has a different impact on the market in a certain period of time. Taking into account temporal features makes it possible to increase the profitability of a trading strategy, choose the right asset and avoid unnecessary losses
A timeframe is a period of time for grouping the price quotes of an asset in order to create a minimum element of a price chart. The minimum elements, most often bars or candles, are used to display the price movement on live charts. For example, the M1 timeframe indicates that it takes exactly 1 minute to form one candle
A candle or a bar are elements of an online chart that display information about how quotes are changing. They are the simplest technical analysis indicators that allow a trader to analyze price movement over a certain period of time. The difference between a candle and a bar is only in the drawing of the graphic element. They are composed of a body and a shadow. The body of the element shows the price at the time of opening/closing the position, the lower shadow shows the minimum price, the upper one shows the maximum for the specified period. The white or green color of the element's body indicates an increase in value in comparison with the previous period, black or red colors indicate that the value of the asset has decreased.
An online chart is a graphical display of quotes in real-time. This multifunctional tool in a convenient format allows you to analyze the existing market trends.
Expiration is the time of contract execution, that is, the period at the end of which or during which the main condition of the binary option must be fulfilled. It is important to choose the right expiration time, that is, to calculate the number of timeframes during which you are waiting for a certain market movement, based on technical and fundamental analysis.
Volatility is a statistical financial indicator that characterizes the excitability of an asset's price. In simple words, the higher the fluctuations in the price of an asset, the higher its volatility. Determining the level of volatility helps a trader to weigh the risk of investments and assess the economic situation in the market. Markets with high and low price volatility require different trader behavior patterns.
The volatility indicator in the vfxAlert application is located on dashboards. Use the dashboard settings to determine the volatility of the analyzed assets in real-time.
Liquidity is the characteristic of an asset, which determines how quickly it can be sold while it still maintains its market price. The most liquid currency units are the EURO and the USD since the world trade turnover in these two payment units is up to 80%.
Indicators for binary options are special algorithms that analyze statistical data and help traders to objectively analyze the market and determine the optimal entry points. It is important to understand that indicators do not show the future, they structure past data - what happened to the market before you made a decision. Most indicators can be divided into two types: trend and oscillator. Trend indicators record and confirm the presence of a trend, while oscillators signal a trend reversal and can be used to predict a market trend.
The vfxAlert dashboard includes the most popular technical analysis indicators conveniently presented in a graphical form:
- Timeframes 1,5,15 and 60 minutes
- The Pivot Points indicator predicts possible support and resistance levels on different timeframes.
- The Summary panel and the Bulls & Bears indicator show the behavior of buyers and sellers in the market.
- The RSI indicator shows in which zone the asset is located: overbought or oversold zone.
- CCI measures the strength of price movement
- Trends shows the strength and reversal of a trend
- Volatility determines the current market activity