Trade Volatile Assets with Complete Confidence

on Jul 31, 2015
Updated: Oct 16, 2019

When it comes to trading binary options, it’s important to understand the nature of the trades you are making. For starters, binary options trades are all or nothing options. The only issue that traders are concerned with in these trades is the direction of price movement. Binary options are ideal for short-term trades – especially with options that can expire within 60 second intervals, within several minutes, hours or weeks.

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Volatility Issues with Binary Options Trading

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The thing with binary options trading is that you can trade in the underlying market with limited exposure to high levels of risk. Under actual market conditions, the risk can become significant. With respect to lower volatility and flat markets with binary options it is possible to trade binary options assets that are in the money.

For many novices to financial trading, volatility is often regarded as an anathema. But without volatility, there is very little opportunity to profit from different forms of price action. Volatility is the most important reality in trading binary options because it allows for vertical price changes that allow call and put options to come into play. While too much volatility makes price prediction difficult, there are means to deal with this issue.

But what exactly is volatility and why does it matter? In short, volatility refers to the inconsistencies in price movements. Lateral price movements or miniscule changes in asset prices do not constitute volatility per se. Most traders like to look at charts and graphs and trade in easily identifiable trends. There is significant profit potential when trends are taken into account. Provided that the correct expiry times are selected, there are plenty of big profits waiting to be made.

Selecting the right timeframe for contract expiries requires a strategic approach. For starters, you should always select either a long-term trade or a short-term trade to get things started. In highly volatile situations, you may wish to opt for 60 second binary options trades. When prices are spiking and dropping in rapid intervals, this high-risk trade may prove especially useful to traders.

Higher Risk Binary Options Trades

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Not every asset class in binary options trading is high risk. Some are lower risk and some are extremely high risk. The latter category includes forex pairs. Since the volume of daily forex trading surpasses every other market, it becomes difficult to find a balance with binary options trading in currencies. The volatility of currency pairs differs from one to another, but when major financial markets are open there is plenty of price movement.

It can be difficult to forecast price movements during periods of high volatility. But this should not deter traders from engaging in the financial markets. Sell options and early surrender options make it possible to obviate the challenges associated with binary trading under conditions of high volatility. When you are trying to determine how erratic the actual price movement is, it’s a good idea to examine the past 24 hours of price action. During periods of high volatility, price will move sharply up or down and then likely move back to a regular pattern. Earnings reports typically precipitate these movements.

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