Long Term or Short Term Binary Options Trading – Which One is Right for You

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  • Binomo
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The Difference Between Long and Short Trades

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When it comes to stock market trading, the terms long and short refer to whether a trade was initiated by buying first or selling first.   A long trade is initiated by purchasing with the expectation to sell at a higher price in the future and realize a profit.   A short trade is initiated by selling, before buying, with the intent to repurchase the stock at a lower price and realize a profit.

Long Trades

When a day trader is in a long trade, they have purchased an asset and are waiting to sell when the price goes up. Day traders often will use the terms “buy” and “long” interchangeably.

Similarly, some trading software has a trade entry button marked “buy,” while others have trade entry buttons marked “long.” The term often is used to describe an open position, as in “l am long Apple,” which indicates the trader currently owns shares of Apple Inc.

Long Trade Potential

Traders often say they are “going long” or “go long” to indicate their interest in buying a particular asset. If you go long on 1,000 shares of XYZ stock at $10, the transaction costs you $10,000. If you are able to sell the shares at $10.20, you will receive $10,200, and net a $200 profit, minus commissions. This is the desired result when going long.

When you go long, your profit potential is unlimited since the price of the asset can rise indefinitely. If you buy 100 shares of stock at $1, that stock could go to $2, $5, $50, $100, etc., although day traders typically trade for much smaller moves. 

The flip-side to an increase in price is a decrease. If you sell your shares at $9.90, you receive $9,900 back on your $10,000 trade. You lose $100, plus commission costs.

The largest loss possible in this example is if the share price drops to $0, resulting in a $1 loss per share. Day traders work to keep risk and profits under tight control, typically exacting profits from multiple small moves to avoid large price drops.

Short Trades

Shorting a stock is confusing to most new traders since in the real world we typically have to buy something to sell it. Day traders in short trades sell assets before buying them and are hoping the price will go down. They realize a profit if the price they pay is lower than the price they sold for. In the financial markets, you can buy and then sell, or sell and then buy.

Day traders often use the terms “sell” and “short” interchangeably. Similarly, some trading software has a trade entry button marked “sell,” while others have a trade entry button marked “short.” The term short often is used to describe an open position, as in “I am short SPY,” which indicates the trader currently has a short position in S&P 500 (SPY) ETF. Traders often say I am “going short” or “go short” to indicate their interest in shorting a particular asset (trying to sell what they don’t have).

Short Trade Potential

Similar to the example of going long, if you go short on 1,000 shares of XYZ stock at $10, you receive $10,000 into your account, but this isn’t your money yet. Your account will show that you have -1,000 shares, and at some point, you must bring that balance back to zero by buying at least 1,000 shares. Until you do so, you do not know what the profit or loss of your position is.

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  • Binarium
    Binarium

    Top Binary Options Broker 2020!
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    Free Education How To Trade!
    Free Demo Account!
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  • Binomo
    Binomo

    Good Choice For Experienced Traders!

If you can buy the shares at $9.60, you will pay $9,600 for the 1,000 shares. You originally received $10,000 when you first went short, so your profit is $400, minus commissions. If the stock price rises and you repurchase the shares at $10.20, you pay $10,200 for those 1,000 shares and you lose $200, plus commissions.

When you go short, your profit is limited to the amount you initially received on the sale. Your risk, though, is unlimited since the price could rise to $10, $50, or more. The latter scenario means you would need to pay $5,000 to buy back the shares, losing $4,500. Since day traders work to manage risk on all trades, this scenario isn’t typically a concern for day traders that take short positions (hopefully).

Shorting, or selling short, allows professional traders to profit regardless of whether the market is moving up or down, which is why professional traders usually only care that the market is moving, not which direction it is moving.

Shorting Various Markets

Traders can go short in most financial markets. In the futures and forex markets, a trader always can go short. Most stocks are shortable (able to be sold, and then bought) in the stock market as well, but not all of them.

To go short in the stock market, your broker must borrow the shares from someone who owns the shares, and if the broker can’t borrow the shares for you, he won’t let you short the stock. Stocks that just started trading on the exchange—called Initial Public Offering stocks (IPOs)—also aren’t shortable. 

Choosing The Right Binary Options Expiry

The Hardest Part Of Trading Binary Options

Don’t get me wrong, binary options are way easier than trading most other forms of financial instruments. And I’m not talking about the ease of access either. There are many reasons why trading binary is attracting more and more traders, and pulling more and more traders away from other disciplines. The very first thing that makes binary better is account size. You don’t have to have a margin account, and there are no margin calls. The second thing that makes binary options better is risk. There is infinitely less risk to a simple yes or no trade than to one that opens your account to unlimited losses the way that spot positions do. This is why so many forex and commodity speculators have switched. If I haven’t yet convinced you that binary is easier than other forms of trading let me mention delta, theta and implied volatility and I will know that equity traders just got a shiver down their back. So, I’ve established that binary is much easier to trade than other forms of trading but that does not make it easy to do. You still have understand the market, work with a strategy, employ a system and use good judgment. If there is one thing that I can say as definitively being the hardest part of trading binary is choosing your expiry.

Caught between a rock and hard place.

How To Choose The Right Broker For Your Strategy

This is of course assuming you have found a good broker to trade with, have learned some technical analysis and are disciplined enough to trade responsibly. I have found that no matter which broker, or which platform I trade on that there is very rarely an expiry exactly when I want. This not a fault of the brokers because they, as a whole, try very hard to provide the options and expiry demanded by the market, namely us traders. The very first step in choosing the right expiry is to understand your strategy and how you are trading. If you are a swing trader like me you will definitely need a broker that has at least end of the week expiry if not end of next week, or end of month, or 30 days, or a combination of these. Not all brokers have them. Most brokers are limited to shorter term expiries because binary options are intended for quick, day trader and option scalper, types of trades.

The next step in choosing the right expiry period comes down to the platform and the broker. The first difference in expiry types is long term and short as in end of day versus end of month expiry. The next difference in expiry types is how expiry is determined relative to time of purchase. Is expiry set at some future time or date or is it a set time from the time of purchase. Let me explain. An end of month expiry is 30 days, at first. And then it is 29 days, and then 20 days, and then 5 days and then one hour all the way down until the time expiry. The amount of expiry depends on how much of that time is left when you buy into your position. If I buy and end of month position on the 1 st , I have roughly 30 days. If I buy it on the 25 th I have 5 or 6 days. I can’t tell you how many times I screwed myself up with that mistake. This is also true of short term expiry. An end of the day expiry has 6 or 7 hours of expiry at the start of trading, but less and less as the day wears on so it is important to keep this in mind.

Expiry set from time of purchase is much better in my opinion but choosing your broker based on expiry comes down to a variety of factors, not just this one. This is how 1 hour, 60 second, 1 week, 30 day and 1 month options are set expire, along with many other choices (depending on the broker). This means that the options expires a set amount of time after the option is purchased. I’m sure the most well known example is 60 second options, options that expire 60 seconds from time of purchase. I like this better because if I want to trade 30 days I can, and am not hindered by the calendar. It just provides a lot more flexibility.

Choosing The Right Expiry For Your Strategy

Understanding your strategy is what ties all of this together. Your strategy dictates what kind of expiry you will need. If you are trading day signals with expiry before the end of the day you obviously don’t longer term expiry and vice versa. However, both kinds of traders can use the same tricks to pinpoint expiry times. They do it by measuring their charts. This is one of the most useful tips I can give to a technician. Go back and measure your charts, measure every rally, every decline, every correction, every trading range until you get a feeling for how your chosen asset moves. It doesn’t matter if you are using 1 day charts, 1 week charts, 5 year charts, hourly, daily or weekly candles. In fact, I suggest measuring your chart in different time frames. Then go back and find all the signals you would want to trade on and measure them. Measure how many candlesticks it takes for the asset to move into the money once your signal has fires. Then average them all together. Then use that figure to pick your expiry, just make sure it can be employed on the platform you are trading. Here are a couple of links to more in depth articles I have written about chart patterns and choosing the right expiry.

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Long-term Binary Options.

Long-term binary options are options that have expiration times of at least one full day and can go up to several weeks or even months.

Usually binary options expire from 30 seconds to a maximum of one or two hours. For the last few years, these were the only expiration times available at pretty much every binary options broker.

There’s two main reasons why brokers started the long-term binary options in 2020. Mostly, every broker offered the same service more or less, some decided to offer long-term options just to be different from other brokers.

Next, binary options started to manage around 2020 to get the attention of mainstream and the critique and review of real inverters and very old school Forex traders. It was pointed out that the short-term options offered a hard time for beginners to make money as these short-term options are very hard to predict.

That’s when these expert traders claimed that binary options could only become a real form of investing and trading if broker stopped restricting the max expiration times of options.

It was said that real investing is a long-term thing, meaning that traders should be given a chance to trade long-term binary options if binary options are to be regarded a proper form of trading, not just a funny game of luck and chance.

Long-term Binary Options strategies, How Do They Work?

There’s a very good reason why these kind of options are so easy to predict. You see, the longer an expiration time is, the less unpredictable the markets are overall, so the better your judgement will be in making a prediction.

Should you choose longer time frames, you can also take into account the events that are expected to happen during that time frame, it might also influence the movement of an asset by going up or down. This can’t be done with short time frames.

Imagine knowing that Apple will launch a brand new iPhone in 2 weeks. Based on this info, how do you think will the stock prices for Apple move after the release? Will they go up, or down? Most likely, they’ll go up in a situation like this. After all, that’s what happens after a product launch.

So using the long-term Binary Options Strategies, you’ve made quite some money in binary options. You made a long-term trade based on the expected major event that resulted in your asset’s price rising.

You can’t use this strategy with short-term options. You can’t predict such movements in just a few seconds or minutes.

Taking into account the big news events that are expected to influence the value of an asset, using long-term options strategies is the best way to go.

Long-term vs. short-term.

Here you can only use technical analysis to determine the outcome of short-term options. That involves reading and interpreting so many different charts and indicators. This is so difficult to do if you don’t already have a background and fundamentals of financial trading.

With long-term binary options, all you need to know is when a major event is going to take place and make a prediction based on that info.

To-the-point examples of long-term options strategies.

Some examples of these strategies applied in the real world, you can also use them to make good money right away in Binary Options Trading.

  1. Apple is expected to launch a brand new iPhone on 15th September 2020. You’ll wait around 2 weeks before this event and buy a binary options contract that’ll expire on the 16 th of September and predict that the value of Apple will be higher at that point.

That’s it! You’ve just won in binary options. This isn’t 100% safe but historically speaking, Apple’s stocks usually increase after a new product launch.

Unfortunately, an Apple event only happens twice per year. You’ll need more than 2 winning opportunities to make real money in binary options. The thing is, you can use this with any company like Microsoft, Google, Samsung, Sony, HP and so on.

You can find out within 10 minutes of research when these companies have their annual events and product launches.

  1. Microsoft is expected to give an annual revenue report on the 10th of August 2020. Two weeks before this event you’ll do a quick Google search and check for industry predictions, did Microsoft make more money during the previous year or quarter?

If everyone expects that Microsoft made more money, buy a long-term binary option predicting that Microsoft’s stock prices will be go up on the 11 th of August. Should everyone seem to agree that Microsoft made less money or that it stagnated, then you’ll buy a contract predicting Microsoft’s value will decrease by August 11th.

The best part about this strategy? You can do this for almost any occasion. There are hundreds of companies out there, some are not even as famous as Apple and Microsoft and might not offer any products but offer services. You just need to Google their revenue report release dates, then Google what experts predict and then buy the appropriate binary options long-term contract.

These are just two ways of making money in binary options with long-term strategies.

As you can see, this is the easiest way to make money. It’s also the reason why brokers introduced this concept so late. Most traders don’t even know this and stick trading with short-term options. Now that you know, make sure you use it and you’ll make money in binary options.

Brokers That Use Long-term Binary Options.

Not all brokers use this option. That’s why we’ve provided a list of some brokers that do and they are legit.

Ubinary – A fully EU regulated broker that offers long-term options for up to one year. Should you be outside of the USA, this is the top broker to choose.

StockPair – Another legit and fully regulated broker for non-USA traders. Expiration times of up to 6 months.

It’s recommend you use this strategy, it does work and most experience this to be the easiest method of Binary Options Trading. You don’t have to spend time analysing charts and looking at indicators. Just look out for major news events and based on those make the correct predictions.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education How To Trade!
    Free Demo Account!
    Big Sign-up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

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