If you’ve done any investing, or even if you haven’t, you will know that the price of investments go up and down. This fluctuation is due to the willingness of investors to buy and sell at any given price.
For example, imagine you are buying oil and the current price is £100 for whatever unit you’re buying in. If you predict demand in oil to grow, then you expect the price to go up in the future to meet that demand. If others also believe this to be the case they might be willing to buy the same amount of oil for a bit more, say, £110. Over a short amount of time, the price has now already gone up. What people think collectively about a certain investment is called ‘market sentiment’. If investors hear some news that suggests the demand for oil is going to go down, or supply is going up, then they may believe the value is going to go down and therefore they may sell their investment. If lots of people start wanting to sell, then they would be willing to accept less in order to make the sale, fuelling the fall in prices.
This is example is about one commodity, oil, but the same mechanics are in place for every investment, from the biggest companies, to the smallest little grain of wheat.
Over the long term, investors tend to make money as the value of most investments go up, but some people make money in the short term by trading – taking advantage of the volatile up and downs of the market over short time periods.
Trading in the markets with Binary Options
You don’t need a huge amount of money to trade on the fluctuations of the markets. One simple way is to use Binary options to trade price fluctuations in multiple global markets. The great thing about binary options is you know what you can win and lose – it’s not open-ended like traditional options.
Binary options are different from traditional options because they may have different payouts, fees and risks. One of the most common binary option is a “high-low” option also known as fixed-return option due to having an expiry time and date and a strike price. If a trader predicts correctly on the market’s direction and the price at the time of expiry is on the correct side of the strike price, the trader is paid a fixed return regardless of how much the market moved. Get it wrong and the investment is lost. The benefit is you always know how much you can gain or lose with each trade.
Depending on where the trader thinks the market is going, they can buy a call (predicting the market is rising), or a put (predicting the market is falling). For most high-low binary options the strike price is the current price or rate of the underlying investment, for example the FTSE 100 index or a currency pair (GDP Vs the USD for example).
You can take advantage of the fluctuations in the markets by using a broker like Binary Uno. Brokers make their money from the percentage discrepancy between what they pay out on winning trades and what they collect from losing trades. One of the interesting features of Binary Uno is that as well as using cash to fund your trading, you can use Bitcoin. This of course adds another dimension to your trading and investing because the price of BitCoin fluctuates.
You can read about my Bitcoin investing journey here!
For long-term investors, the fluctuations in the markets can be a source of stress and it’s advisable to ignore the ups and downs as much as possible. But short term-looking investors and traders can take advantage of the ups and downs and make money, so if you want to have a go, then good luck!