Cryptocurrency and Binary Options The Breakout Success of the Year

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Cryptocurrencies and binary options – faster and more profitable?

Cryptocurrencies, binary options are modern ways of obtaining speculative and investment profit. Consider the pros and cons of crypto and binaries, and how to make money.

The claim that we live in a very fast changing world has long been hackneyed. Another question is that people by nature are quite conservative, and it’s very difficult to get a person moving. But the changes that are taking place around, including in technologies for generating profit, are simply impossible to ignore.

Profit twice as fast

At one time, one of the favorite tricks of Sberbank employees was a quote from “Alice in Wonderland”: “You need to run as fast just to stay in place, but to get somewhere, you must run at least twice as fast.”

A couple of decades ago, trading was very conservative and looked more like a classic buy-and-hold investment. However, now there are products that allow you to get fairly quick profits based on classic trading rules.

Today we’ll talk about two tools that are suitable for extraction quick profit, – binary options and cryptocurrencies. The main thing to remember is that no one has repealed the laws of economics, and often such profits are accompanied high risk of loss of funds.

Yes, we will not argue that cryptocurrencies can be considered as a source of more conservative investment income. But we will be cunning if, with volatility so characteristic of crypto-exchanges, we will consider them only from the point of view of investment. We all start with binary options.

What is binary options?

The definition of a binary option is very simple, it can be found in almost any economic literature on derivatives or derivative financial instruments. We will give one of them.

Binary option – agreementin which the seller of the option is obligated to pay the buyer a certain amount if a negotiated event occurs by the time the option is exercised. If it does not occur, the seller of the option pays nothing to the buyer.

The event that occurs at the time the option is exercised can be absolutely anything. In general terms, this is the movement of the price of an asset selected by a trader above or below a certain price value.

It looks like this:

  1. the trader chooses a financial asset that is convenient for him. As in the case with other derivatives, such an asset can be currency pairs, the same cryptocurrencies, stocks, stock indexes, goods . In a word, almost everything.
  2. After choosing an asset, the trader indicates the amount – in fact, the price of the option, and the time during which the option will be valid.
  3. Then you need to correctly predict the direction of movement of the asset. As when opening a “long” or “short” position with exchange-traded instruments, in order to make a profit, the trader must correctly determine whether the selected asset will fall or grow.
  4. After the transaction, the price of the asset is fixed. Drawing an analogy with a classic option, this is the strike price.
  5. If by the time the option expires, the trader correctly predicted the direction of the price movement, then he receives a fixed percentage of profit to his option price. If he made a mistake, then the lost amount is 100% of the option price. Therefore, as in classical trading, the formula works here: higher risk – higher profitability, lower risk – profitability is also lower.

Making Binary Options Profits

In general, there are two options for correctly predicting price movements and, accordingly, making a profit on binary options.

  1. The first option involves active analysis of the market situation fundamental and technical methods for predicting short- and medium-term market behavior.
  2. The second option, in our opinion, is more popular among traders and involves the use of two main advantages of binary options – time and distance, which the price of the selected asset should “go through” (we will talk about these advantages below).

The second option is called trade “on the news”. The fact is that quite often the market reacts not to long-term macroeconomic forecasts, but to momentary events.

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We give a simple example of transactions on the news

The news on good economic growth in Russia (high GDP) will be positively received on the market. And traders are likely to buy the Russian ruble, which will lead to its growth against other currencies.

This movement can be very short-term and almost elusive for the layman. However, for a binary options trader, this can become a real “gold mine” (unless, of course, such a trader learns to correctly evaluate certain events).

News about economic growth, inflation, unemployment and other macroeconomic indicators are constantly published. The time of publication of such news is 99% known in advance and is reflected in special economic calendars. Using these calendars, traders carry out transactions with binary options, short-term working to increase or decrease the market – depending on their assessment of the situation.

Advantages and disadvantages of binary options in terms of profit

It is undeniable that binary options are a very controversial tool. But the same can be said about almost any financial instrument used in speculative trading. And before moving on to cryptocurrency, we’ll talk about the pros and cons of binary options. Let’s start with their negative sides.

Cons of binary options

High risk of capital loss

Yes, statistics are merciless. As well as in trading on the stock market, on the foreign exchange or on the derivatives market, there is a very high probability of losing your funds. The simplicity of binary options does not completely eliminate their riskiness, therefore, to think that they can be a source of “easy money” is, at least, naive.

Time factor

Alas, there are plenty of tools for predicting the so-called price movement goals (for example, “fair price” in the fundamental or support / resistance level in the technical analysis). But time forecasting tools in both types of analysis are extremely few. Even correctly predicting the direction of movement of the asset, the trader may make mistakes over time, which is critical in binary options and may result in losses.

Lack of regulation

Indeed, the binary options industry in Russia is not regulated by anyone. This means that for a trader the issues of protecting their funds and frequently arising conflicts of interest “broker-trader” also come to the fore.

Pros of binaries

The simplicity and accessibility of the “mechanics” of binary options

To understand the principle of bargaining and making a profit, in fact, is not difficult. In addition, the range of assets on which binary options can be acquired is very wide: stocks of both Russian and foreign companies, any indexes and any currencies, etc.

Transaction costs

Imagine that you wanted to buy shares in a company. Unfortunately, we must be prepared for the fact that the acquisition of securities will lead to associated costs. First of all, this is a commission. Binary Options Broker for the purchase and in some cases the depositary commission for accounting for securities. Binary options exclude such commissions, and your associated costs will be zero.

Time

Yes, we remember that it is written by us in the shortcomings of options. But, on the other hand, it is also their dignity. What other financial instrument, in addition to binary options, will allow you to earn, for example, 100% of the invested amount in just one minute?

Trading “on the news”, which we spoke about earlier, suggests the possibility of using a very short reaction time of the market to macroeconomic events. For binary options, this is enough for you to earn.

Distance

If you have already been engaged in trading, then you probably know that your income directly depends on the distance that the price “travels”. But what if the asset, which you considered promising and acquired for your portfolio, moved only a couple of percent up? It is possible that this move will not even cover transaction costs.

In binary options, however, this is out of the question. The profit that the trader receives does not depend on the distance the price goes.

That is, if the direction of the asset’s movement is predicted correctly, the most insignificant price change in the direction necessary for the trader is enough.

Undoubtedly, the binary options industry will continue to remain attractive for both beginners and professional traders. But literally not so long ago, another product appeared that caused genuine interest among many people – cryptocurrencies.

Cryptocurrency Earnings Approaches

The cryptocurrency market, of course, has a number of features compared to more mature, mature markets: increased volatility, less liquidity, the ability to generate excess returns.

However, if we consider the general principles of profit-making, working with cryptocurrencies is not much different from investing or speculating in other assets.

Hold is not for crypto

Exist investment approach “hold” (or “holding”), in which the user buys cryptocurrency and “forgets” about it. It does not trade, but simply waits a long time until the asset grows in value. True, in the current realities, this is undoubtedly not the best strategy. The market is just starting to develop, and there are no guarantees that the coins will survive the price volatility.

A striking example is the dynamics of the reference bitcoin. After the most powerful growth in 2020, when in December its value exceeded $ 19, bitcoin sharply rushed down. Already in February 000, the value of the coin was only $ 2020.

Now imagine how the “holders” are now feeling who bought the coin at the peak price in December 2020 (unless they are Zen Buddhists, of course)?

Portfolio and rebalancing

The optimal solution for the investor is the creation of a cryptocurrency portfolio and its constant adaptation to market realities.

Due to fluctuations in digital money rates, the market situation is constantly changing. Therefore more it is beneficial to carry out regular rebalancing of the portfolio, adapting to the situation in the industry, than just keeping the asset for a long time.

Moreover, the more often the rebalancing occurs, the greater the profit. If you adapt the portfolio every day, yield will be almost five (!) times higherthan in the case of adaptation once a month. However, this scenario of working with digital money is not suitable for everyone. This requires large investments and professional knowledge and experience.

Cryptotrading

Another approach to profit from cryptocurrencies is trading or speculating on the difference in exchange rates. It is available for both beginners and professionals. And here the high volatility of digital money, complicating the life of an investor, will only help the trader.

With this approach, you do not need to deal with the physical purchase and storage of coins. Only need choose a brokerthat you trust, and spend some time researching and analyzing the market.

The advantages of this approach: the ability to trade every day, a low entry threshold and a wide selection of trading instruments – from classic margin trading of the “forex” type to digital options with fixed income. As they say, for every taste and opportunity.

Read about trading and investing opportunities in our Facebook feed and Telegram channel!

Nikolay Dudchenko

Financial Analyst Nikolay Dudchenko. Experience in the financial markets – since December 2006. During this time I tried myself in the stock and foreign exchange markets. It prefers long time frames and sometimes uses fundamental analysis when making decisions. Trading styles – swing and positional trading. Technical analysis – Fibonacci levels, wave and indicator analysis.

Beginner’s Guide to Cryptocurrency Trading – Basics

Cryptocurrency trading is more popular than ever and a huge number of investors are looking to jump on the crypto hype to make easy money. But it is very important to understand that crypto trading is no get-rich-quick scheme as most people think.

As a beginner cryptocurrency trader, you have to do your research to be positive about the cryptocurrencies you choose to invest in. You most definitely do not want to put your money into something that you do not believe in. In this article, I am going to examine all the necessary steps you should take as a crypto beginner. However, in the end, it is up to you to take them. But first, let’s start with some basic facts about the cryptocurrency market.

Cryptocurrency market is open 24/7

Unlike fiat currencies, cryptocurrencies can be traded 24/7. Trading volume differs during the day as traders from different countries enter the market at a different time. These changes have, however, a very low significance.

Crypto market is very volatile

The cryptocurrency market can skyrocket or fall down even by tens of percent in a matter of minutes or hours. It is completely different from stock or classic forex markets and it is important to realize that investing in cryptocurrencies puts your capital at high risk. The crypto market is probably the most welcoming one, even for beginners. Nevertheless, you still need to understand that the huge price spikes cryptocurrencies experience on a regular basis do not always bring the desired profit. In fact, they can also have a devastating effect on investors’ capital. Now, I am going to teach you how to significantly reduce the risk. However, you always have to be aware of the crypto market volatility.

1. Find a cryptocurrency broker you can trust

Searching for the best crypto broker is not an easy task. There are many crypto companies and their offers vary. The main aspects you should consider when choosing a broker are the following:

a) Trust & Regulation

If you come from a European country, the broker should be regulated by the CySEC, a regulatory body which oversees all the broker’s activities. They also provide full deposit insurance up to 20 000 dollars. Investors from Australia should be looking for brokers with ASIC license.

b) Fees

The less you pay in fees the more you can earn. So it’s only logical to find a broker with the lowest fees possible. Most brokers charge an amount equal to a spread for opening a position. A spread is the difference between what you pay for a cryptocurrency coin and what you get when you decide to sell it to the broker. Apart from that, many brokers charge a swap when you stay in a position overnight. Such brokers are usually best for day cryptocurrency trading and brokers with no swaps are best for a long-term holding.

c) Cryptocurrencies you want to trade

If a broker does not offer cryptocurrencies you desire to trade, there is no point in creating an account. Therefore, do not forget to check whether the company of your choice offers all the cryptocurrencies you plan to trade.

d) Leverage

Leverage can help you benefit from small price movements of cryptocurrencies. It is a very powerful tool when used by professionals, however, beginners should only use it with great caution or not at all. Fortunately, the cryptocurrency market is volatile enough to make a good profit even without it.

Broker Regulated by Regulatory agencies ensure that brokers operate in a transparent and honest way. They protect the best interests of clients and also feature an investor compensation scheme which protects trader’s deposits up to a certain limit. Some of the major regulators in the industry include the CySEC in Cyprus, the FCA in the UK and the ASIC in Australia. Min. deposit Trading platforms A trading platform is a computer or mobile software program used to execute transactions within the financial markets. Cryptocurrencies Special features A list of features that provide a given broker with a competitive edge. Ad Disclosure The table below contains links to 3rd party websites of our top partners from whom we receive compensation at no additional cost to you.
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
Between 76.4-87% of retail investor accounts lose money when trading CFDs with these providers.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

2. Get started with the right cryptocurrency

If you haven’t chosen the cryptocurrency you want to trade, now is the time. Selecting a digital coin with the highest potential is a very important step. You do not want to choose a cryptocurrency you don’t have faith in. When you do your research about cryptocurrencies, there are several things you should look for:

  • Infrastructure (App development, Cloud storage, Virtual Private Networks, funding, etc.)
  • Technology (Quick transaction process, firm and easy to use UI that is easy to adopt, etc.)
  • Development team (Skilled and experienced, solid amount of developers, etc.)
  • Growing popularity (Rising demand for the cryptocurrency, more people using it, media coverage, etc.)

These are the most important general rules when determining a cryptocurrency’s potential. Some of them are more important than others, but the cryptocurrency you select should meet at least 3 of these criteria.

3. Determine where the price is. Is it low or high?

Is the price now at its 45-week low? Or is it at its maximum? You probably know the saying “buy low, sell high”. Let me show you a great example of what I mean on the Ethereum chart which displays the price movement from the beginning of the year 2020 to 12.6.2020.

Wow, that looks really great, doesn’t it? That seems like a really good investment to make…Until…

The price went down to half in one-month time. It is definitely true that there might be situations when the value of a certain cryptocurrency with good technology, funding and media exposure keeps rising for a long time. However, such investments are very risky for beginner traders because it is hard to determine how long the growth can last. We surely do not want to end up chasing highs and go with the excessive optimism when it actually is the only thing pushing the price up.

4. The best way how to approach crypto trades not only as a beginner

One of the best investors of all time, Warren Buffett, once said:

Be Fearful When Others Are Greedy and Greedy When Others Are Fearful

And this is a great way to approach the cryptocurrency market. Are others dumping coins for a relatively low price? Great! It might be a good time to buy them. Is the market optimism fake? Well, now might be a good time to lock in those profits and get out of the trade safely.

5. Face the crypto market with an exit strategy

Traders buy cryptocurrency coins when they consider the price to be low. Now, once you are in a trade and the price goes up, you have to think about the best time to get out of the trade (if you speculate on the price growth). You do not want to hold onto it until the end of days. The best time for leaving is when the prices are going too high and the investors are getting carried away. One way to determine this moment is by asking yourself “Do I honestly believe the coin is worth more?”. If you think that there is currently no more space for the cryptocurrency to grow, it is time to get out of the position.

6. What affects the price of cryptocurrencies

There are many fundamental influences that can drive the price of cryptocurrencies down or up. The main of them are as follows:

a) Government Regulations

Whenever any government makes a public statement about the regulation of a cryptocurrency, the market always reacts to it. Do you remember when China banned ICOs? The price of Bitcoin and other cryptocurrencies dropped down rapidly. Therefore, it is very important to keep an eye on such events, whether you are a beginner or a skilled trader.

b) Media exposure and other influencers

Generally, cryptocurrencies gain in value when they receive positive media exposure. It is simply because more people are interested in buying the coins. There are also individuals who can influence the price of cryptocurrencies. Such people are usually extremely well-recognized in the field of finance and investing. So, when the CEO of the biggest American bank J.P. Morgan – Jamie Dimon publicly stated that he thinks that Bitcoin is a fraud that will eventually blow up, it was no wonder that the Bitcoin market took a big hit. Because of this statement, J. Dimon received many negative comments suggesting that his statements were intended to manipulate the price of Bitcoin.

c) Wider Mainstream Acceptance, New firms backing up the project

Has just Amazon, eBay or other huge international firm announced that from now on they will accept payments in Bitcoin? Great! You probably know what that means for the market… Similarly, when big companies like Microsoft, Intel or others provide their name and finance, it is another reason for the price to go up.

d) Technological Changes and Innovations

With every new technological change, there is a high chance that it might significantly affect the price of a cryptocurrency. For example, if a new security protocol that will make the cryptocurrency even more reliable, secure and scalable is scheduled to be released, it might induce a positive response of the market.

e) State of other markets

It should be no surprise that cryptocurrencies react to other markets’ developments as well. In the past, cryptocurrencies tended to benefit from crashes of other markets. Gold and Japanese yen are no longer the only instruments categorized as safe havens investments.

Is that all? Let’s wrap up the crypto guide for beginners & dummies

Here is the deal. The cryptocurrency market is still relatively new and unstable and its trading is complex. You should, therefore, never stop learning. Towards this very purpose, we have here on the website crypto guidepost where we feature crypto news, tips, guides, market’s best brokers and crypto glossary. Here is a selection of 3 articles you might want to read after finishing this guide for beginners.

– 3# Crypto Chart Patterns for Day Trading
– The best Hodling techniques
– How to short any cryptocurrency like a pro

and much more can be found in our crypto section.

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