Looking to other markets after the dreadful beginning to 2016 for stocks can be a good idea for those that want to go long on their trades and perhaps hold them for longer than a few days or weeks. This is a great idea in theory, but not nearly as easy as it sounds. There are absolutely no guarantees in any financial market, and with the worldwide economy showing so much instability right now, finding long term opportunities can be tough. When things are uncertain, finding value buys is the best choice, and plenty of those exist in the stock market right now, thanks to artificially low prices in many companies’ stocks. But that doesn’t mean that looking to other markets for short term trades is not smart.
The Forex market is one of the best places to be looking right now. Currencies do carry volatility with their price movement, but they come with a sort of predictability that can be hard to find elsewhere for the time being. Currencies are not as susceptible to things that are going on in an irrelevant market because there are two markets involved. For U.S. stock prices to drop because of a market crash in China makes no sense to many people, but if you were trading the U.S. dollar in comparison to the Chinese yuan, the trades would be much easier to predict simply because the data that you analyze is far more directly relatable.
The other appeal that currency trading has for traders is that they are more reliant on technical indicators than other asset types are, especially during times of extreme volatility or uncertainty. This is the case now, and another reason why this opportunity is coming up. For those that have a background in binary options, currency pairs have added appeal because there is no need to change brokers since these are already included with binary brokers.
You can trade through a Forex broker, too. There are extra benefits to this, of course, but also drawbacks. One benefit is the use of leverage. Leverage allows you to increase your trade position, sometimes by 400 times or more. So, if you wanted to trade with $1, a leverage capability of 400x would actually let you trade with stakes of $400. This can help multiply your profits quickly. But, as you might have guessed, it also can multiply losses quickly, too. Trading currencies through a binary options broker avoids leverage and replaces it with a fixed rate of return. This gives them a level of predictability that you can only find in fixed investments, like bonds and CDs, yet with a much higher turnover to help multiply profits faster.
That’s another benefit. Binaries are not open ended. You don’t take out a position and hold it until you feel like selling. You open a trade and stipulate how long you want the trade open for. It can be a 60 second trade, or it can last for the rest of the year. By looking at the asset you wish to trade and thinking ahead, this can be used to your advantage. In times of volatility, this gives you a more solid long term plan.
Currencies are far smarter to trade right now than looking to commodities would be—the other asset included with most binary brokers. Oil is defining the commodity market, and there are way too many unanswered questions about what will happen with crude. Saudi Arabia has a lot of control over this, and they appear to be beginning some sort of economic warfare against Iran, with energy prices being their number one weapon. For now, it’s smarter to stay away from commodities because of this turmoil. Even short term binary options traders are seeing way too much difficulty here for this to be the right choice.