Markets Trading – Glossary
A key step to trading success is knowing the lingo. Learn more about essential binary options terminology from the comprehensive Markets Trading glossary.
Anyone can trade binary options; even without prior online trading experience or an understanding of the financial markets. Despite this, there are many terms that are specific to this form of trading and having an understanding of the terminology, can increase your trading accuracy and success. Markets Trading has compiled a comprehensive glossary of the many terms used in binary options trading which will help you to navigate this online investment form with ease.
The 60 Seconds trade option is a type of option where a trade is set to an automatic expiry after exactly one minute or 60 seconds. Sixty second options can be very profitable especially when an asset’s price is trending and they are ideal for short term traders.
Also referred to as an underlying asset in binary options trading, an asset is a financial security offered by a broker which is available for trade. It is these global assets which one trades in binary options. Markets Trading offers a wide choice of assets including currency pairs (forex), stocks, commodities and indices.
In binary options trading, a trade is said to end ‘at the money’ when the expiry price of the selected asset is the same as its starting (strike) price. That is, the price did not increase or decrease by the expiry time of the trade. With this type of outcome, the invested funds are refunded to the trader in full.
This is a type of trade option where a trader speculates whether or not the market price of an underlying asset will be within a specific price range or barriers upon expiry of the trade. This price range includes upper and lower limits. A trade will only end successfully if the asset price is within the range or barriers when the trade expires.
Bearish or bear market is a common term used in stock and forex trading to refer to a market or a specific asset whose market price is declining or decreasing. A bearish market is characterized by a series of downtrends. In binary options trading, when an asset’s price is declining, it is best to make a ‘Below’ or ‘Put’ option trade.
Binary options are financial contracts where the trader has the right but not the obligation to exercise the purchased option. The term ‘binary’ comes from the fact that a binary options trade only has two possible outcomes; you either win a predefined amount of money or you lose a predefined amount of money. Binary options are characterized by fixed payouts which are known before one makes a trade. A trader earns the payout percentage only after correctly predicting the direction of price movement of the selected asset in a set period of time. When a trade ends successfully, it is said to end ‘in the money’ and the trader earns the predefined payout. On the flipside, if a trader makes an inaccurate prediction, the trade is said to end ‘out of the money’ and the trader will lose their investment amount only.
A broker is a company or organization that offers a trading platform over which traders can access financial markets. A broker will generally facilitate the buying and selling of financial assets between a buyer and a seller. Different brokers offer a choice of trade options and assets as well as different payout percentages per trade.
Bullish or bull market is a term used to describe an asset or a financial market whose price is increasing or rising. A bullish market is characterized by a series of uptrends. In binary options trading, when an asset’s price is increasing, it is best to make an ‘Above’ or ‘Call’ option trade.
A Call option is a classic type of binary option which is purchased when a trader expects the price of the selected underlying asset to increase at the expiry time of the trade. If the expiry price of the asset is higher than the starting (strike) price at the end of the trade, the trade will end ‘in the money’ and the trader will be paid out the predefined payout percentage.
A commodity is a type of asset class which can be traded at Markets Trading. Commodities are physical items traded in global markets including a wide variety of agricultural and industrial products such as cotton, silver, gold, platinum, coffee, wheat and crude oil, among others.
Currency pairs or forex are one of the asset classes offered by Markets Trading. Currency trading involves the buying and selling of different global currencies and in binary options trading, a trader trades a pair of currencies such as the EUR/USD (Euro/US dollar). That is, what is the value of the USD against the EUR? We offer a wide range of currency pairs such as USDCAD, EURUSD, EURTRY, GBPAUD, and many more.
The current price, also known as the market price, is the prevailing price of the underlying asset which is relayed in real time by data providers such as Reuters. The current price at expiry is compared to the starting (strike) price of the asset and is then used to determine the outcome of a trade.
Day trading is a form of strategy trading used by investors as well as binary options traders where a trader opens and closes a trading position on the same day.
In order to access a trading platform, you are required to deposit funds into your trading account. A deposit can be achieved using one of the many secure banking options offered by Markets Trading.
Double Touch is one of the variants of the high-yielding Touch options where a trader predicts if the market price of an asset will reach or ‘touch’ any one of the two pre-set target prices. Once these price targets are touched, the trade will end ‘in the money’.
The Double Up feature is a pre-expiry option which can be used directly from the Markets Trading platform. By using this risk management tool, a trader is able to create a duplicate trade of an existing trade. That is, the asset will be the same, as well as the expiry time yet the strike price of the asset might differ. In this way, a trader is able to double their chances of having two trades which end ‘in the money’.
Early closure or Sell is an effective risk management trading tool which allows a trader to close a trade before the preselected trading duration expires. The Sell tool can be used to lock-in profits if a trader suspects that the market price of the asset will change direction against the prediction made.
The terms, expiry time and expiry duration, are used to refer to the specific time the trade option will expire. A trading position is subject to automatic closure when the expiry time is reached. A trader is able to select the most preferable expiry duration before entering a trade and this can be as short as 15 seconds, right up to a year.
The term ‘forex’ is the abbreviation for foreign exchange and it represents the forex market which is the biggest financial market in the world, with over $6 trillion of intraday transactions taking place daily, from Monday through to Friday. Markets Trading offers a wide variety currency pairs to trade with lucrative payouts.
Hedging is a strategy used by investors and binary options traders where a trader will hedge one trade position against another. That is, a trader will open two trading positions on the same asset but in different directions. Hedging is an effective risk management strategy which reduces the risk of trading while securing the rewards.
The High/Low option is also commonly known as the Above/Below or Call/Put trade options. In the High/Low trade option, a trader needs to predict if the price of the selected asset will be higher or lower than the starting (strike) price at the expiry of the trade. By choosing the High (Call) option, a trader expects the price of the selected asset to increase by the expiry time and by selecting the Low (Put) option, a trader predicts that the price of the asset will decline by the expiry of the trade.
Indices are a type of asset class offered by Markets Trading. An index comprises of a group of stocks and price changes in the index occur as a result of individual price changes in the stocks making up that index. Examples of indices include the S&P 500, Dow Jones, FTSE 100 and the NASDAQ, among others.
This is another term used to refer to an underlying asset; currencies, stocks, commodities or indices.
In the money is a term used to refer to the successful outcome of a binary options trade. A trade is said to end in the money when a trader’s prediction turns out to be correct when the trade expires. In a successful trade, a trader is paid out the predefined payout percentage as specified on the Markets Trading platform.
When making a trade, you are required to input an amount you wish to invest in the trade option. The money wagered on a trade is your investment in that particular trade. In binary options trading, the size of the return on a trade is a percentage of the amount invested.
Ladder is a trade option offered on the Markets Trading platform. In this trade option type, a trader gets multiple strike prices for the selected asset with different dynamic payouts for each position. This allows for relatively high payouts for short term trades.
This is a type of trade option which is purchased when a trader expects the price of the underlying asset not to reach or ‘touch’ the given target price at the expiry of a trade. If an asset’s price fails to reach the target price, the trade will end ‘in the money’.
One Touch is a type of trade option where a trader predicts if the price of the asset will reach or ‘touch’ a pre-set target price by the expiry of a trade. If the asset’s price hits the target price during the course of the trade, the trade will end ‘in the money’ and the trader will earn the predefined payout percentage.
This term is used to refer to the unsuccessful outcome of a trade. A trade is said to end ‘out of the money’ when a trader’s prediction regarding the direction that the price of an asset will move by the expiry of the trade, is incorrect. When a trade ends ‘out of the money’, a trader will lose their investment amount.
Pairs is a type of trade option offered on the Markets Trading platform. In this option type, a trader is trading one asset versus the performance of another asset in terms of percentage. That is, a trader can trade gold vs. silver, which one will perform best by the expiry of the trade?
A payout refers to the rate of return on a successful binary options trade. Binary options brokers mainly offer payouts in terms of fixed percentages of the invested funds. For instance, on a trade with a 70% payout where a trader has invested $100, a trader will earn a profit of $170 if the trade ends successfully. That is, the invested funds are also returned to the trader. The total payout is calculated using the following formula: Total payout = (Percentage payout * Invested funds) + Invested funds
A Put option is a type of a trade option which is purchased when a trader expects the market price of an asset to decline by the expiry of the trade contract.
Resistance and support levels are widely used by traders to formulate trading strategies. The resistance level is defined as the price level which, historically, an asset has had difficulty breaking through. When a financial asset reaches this resistance level, this is often a technical signal that the asset’s price will now fall. On the other hand, the level of support is defined as the price level which, historically, an asset has had difficulty falling below. When a financial asset reaches this support level, this is often a technical signal that the asset’s price will now rise. Many traders use the resistance and support levels as the points at which to enter or exit a trade.
A risk is anything that stands between you and the prosperity of your investment. In binary options trading, trades are characterized by fixed risks and when they occur, these risks can only affect the invested funds and not one’s funds in their trading account.
The Rollover feature is a profit maximizing tool that enables a trader to delay the preselected expiry time of their trade option (at a cost) to a later time/date. This feature is effective when a trader realizes that their asset requires more time to move in the predicted direction.
Markets Trading offers traders access to social trading and the Spot Follow option enables traders to follow the platform’s most successful traders, and to replicate their positions.
Stocks is an asset class offered by Markets Trading. These assets include a wide variety of global stocks from different companies which are available on their respective stock exchanges. Some of the most common stocks include Facebook, Apple Inc., Yahoo, BP, Vodafone, Alibaba and many more.
Also known as the purchase price, the strike price is the market price of an asset when you purchase an option. This strike price is used by Markets Trading to determine the outcome of a trade. That is, the expiry price of the asset is compared to the strike price to determine if the trader’s prediction is accurate or not.
Trend refers to the direction of the market or asset price and a trend can either be an uptrend, a downtrend or a horizontal trend. In an uptrend, the price of an asset is moving upwards or increasing whereas in a downtrend, the price of the asset is moving downwards or decreasing. In a horizontal trend, the price of the asset is moving sideways or ranging.
Every financial asset has its own trading days, trading hours as well as holidays. Assets can only be traded on the Markets Trading platform during their trading hours.
After trading successfully, depending on your profit management strategy, a trader may want to withdraw part or all of their funds from their trading account. The process of transferring money from your trading account to your bank account or credit card is known as a withdrawal. The period it takes for money to reflect in your bank account depends on the banking option chosen and full details of the withdrawal process can be found on the Markets Trading website.
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