Indices provide excellent markets for binary options traders across multiple time frames and especially for those who are lucky enough to be able to trade during market hours. Whilst the seemingly erratic swings of all financial markets creates both opportunities to win and lose, many traders see indices trading as a good way to increase their probability of success. Several reasons exist why index trading should be considered by binary options traders as an alternative, or alongside, the popular currency and individual stocks within a giving market.
Reasons to trade indices with binary options
The first reason why indices may help binary options traders is due to the way that they are. Many of the most influential indices are comprised of at least 100 of the largest stocks within theirs markets and therefore go some way to eliminate some of the market ‘noise’ experienced by individual share prices. This combination therefore eliminates the influence of erratic stocks and the effect of those companies with soaring share prices will often be counterbalanced by a less-pronounced rise or fall of other stocks within the index. This can be highly beneficial for binary options traders who are looking to purchase options with the underlying trend. Since an index will reflect the general market sentiment over one or several hundred stocks it is an excellent way to trade intra-day price trends as investor confidence rises and falls with the day’s news.
Planned news releases provide excellent opportunities
The news is one of the really great advantages of trading indices and binary options traders can really capitalise on positive and negative news releases and their wider influence on the stock market as a whole. All traders are aware that poor trading results from the likes of Apple and Google, as well as unexpectedly strong employment figures have the power to pull the entire stock market to a strong close. News traders who anticipate, or purchase options shortly after the release, can often make a fairly simple judgement of higher or lower on an index with a major news release. Additionally, the most influential data releases are foreseen and calendared with a precise release time. Analysing the days influential news, as well as judging the general trend of the index after the opening bell, can be a good basis for looking for entries based on whether this is foreseen as generally positive of negative.
Trade binary options at key technical levels
Another useful and highly compatible feature in trading indices with binary options are their sensitivity to technical price levels. By this we mean the key support and resistance levels where orders tend to collect and cause price to either move definitively higher or lower as a result. Pivot points, for example, are calculated from the indices previous day’s high, low and opening price and are seen by traders as points on a price chart where reversals are possible. Binary options traders can take advantage of the knowledge that these levels exists and interpret the price action at these points to ascertain whether the bulls or the bears will have the advantage before purchasing options. Similarly, technical levels such as round numbers, which have huge psychological importance (think about the 10’000 point mark on the Dow Jones), often take several attempts and rejections in order to break. These can be used as great levels to also look to purchase binary options on any index and offer a high probability of success.