Binary Betting on Markets
Binary betting is predominantly used as a tool for trading on markets, allowing traders to speculate on the movement of the markets over a given day. Binaries are particularly suited to trading on markets because it is comparatively easier to forecast the behaviour of an overall market on the trading day than a particular asset or even commodity, and as such they are the weapon of choice for many traders who work off macroeconomic triggers to call market movements.
Because markets, like the FTSE, work on averages, they are seen as a closer indicator of economic outlook at a given time. While the telecoms industry might experience a surge on the day, poor trading results from the US for example might haul the market downwards, and by backing the market rather than individual stocks and securities traders are able to capitalize on the wider movements, and thereby insulate themselves from micro-fluctuations in industries and particular stocks.
For the binary trader looking at a particular market, the question that poses itself is ‘how likely is the market to rise or fall between now and the close of trading’. If it is likely to rise, the binary trader should buy, and if its likely to fall the trader should sell – if the movement occurs as forecast, the trader will pick up the difference between the spread point at which he bought or sold and the settlement rate, fixed at either 100 or 0.
Therefore, as opposed to understanding whether or not a market is overpriced or is likely to experience fluctuations over the day, which is of little relevance, the trader need only concern himself with the direction of the movement – only the final outcome as compared to the starting point matters for the binary position.
As an upshot of this, it pays to understand the impact of wider market factor and economic triggers on market movements. Economic outcomes factor on market confidence as traders respond to both the short and long-term implications of particular announcements, so by being in a position to read these announcements and forecast their likely impact ahead of time, you can readily capitalize on the direction of movement by backing the appropriate binary position.
Of course, brokers aren’t stupid, and they are equally as engaged in trying to identify how markets move, so it pays to try to be one step ahead of the game, and in any event to factor in the odds being offered by the broker in the form of the spread.
Binary betting on markets can be a good way to capitalize on foreseen fluctuations in the market index over the trading day, and by calling it correctly, you can expect to see multiple times your stake in return, depending on the odds on offer and the ultimate directional movement of the market.