The financial market, for the most part, tends to be quite smooth. Of course, every now and then, there is an economic, political, or social shift and the market gets bumpy for a while. Most investors and traders tend to step away for periods such as these.
This is because it can be quite difficult to decide just where the value of an asset is going. While this is a prudent step, you may also be missing out on quite an opportunity. If you know about trading binary options during volatile times, you may actually be able to make yourself some money.
However, it is important to understand that expert traders are most likely to benefit from these techniques:
The Types of Volatility
The first thing that you should understand is the different types of volatility that you may encounter. One of these types is known as historical volatility. This is just how volatile a certain asset has been prior to this.
These statistics are collected over a particular period of time. Using them, traders are able to decide how the asset may behave again. While it can be useful, you can rely solely upon the information that has been provided to you by this analysis.
The other type is called implied volatility. This is a measure of just how volatile a particular asset can get. This is determined by looking at the price of standard options in relation to this precise asset value. In turn, this can be used to identify extreme highs or lows in the market. These extreme price points are typically an indicator that the market is going to change direction.
The relative volatility indicator is an oscillator style indicator. It has a very important function and that is to provide information about the direction of the volatility. Without this, you will just be able to view volatility as movement but be unaware of the direction it will take.
Then, there is the Chaikin volatility indicator which is also an oscillator style indicator. This can be used to identify the uppermost and lowermost parts of trends. As such, it can identify when a market reversal is about to take place. Last but not least, there are the Bollinger Bands, which are actually quite popular during popular periods.
The bands here pull together when volatility decreases and relax when it increases. With the help of these bands, you may be able to discern market reversal or continuation.
The other thing that traders think about during volatile times is expiry times. The expiry times that you decide upon should depend on just one thing. Are you hoping to ride out the volatility with minimal impact or are you trying to place trades that will make you money.
Let’s say, that you just want to survive this particular period. In this case, longer trades would make sense. This is because they help you to achieve some balance. If you want to be a part of it, however, then shorter trades are what you should opt for. You can make use of the quickly changing prices and get a higher payout for your trouble.
Important Information for Volatile Markets
When the market is volatile, there are great many number of changes afoot. Even the most mundane process may be turned on its head due to the fast paced movements taking place. For instance, you are used to up to date information prior to making your trades.
You may be surprised to learn that it is not always so during volatility as the prices can fluctuate so quickly. Similarly, you may find that your trades are lagging due to a larger number of trades taking place. Therefore, it is important to keep these in mind while placing trades.
This is what you need to know about trading binary options during volatile times. As long as you take the risks into consideration and implement a proper plan, you should do well.