What is the correlation for binary options broker

Trading binary options should go hand in hand with trading any other financial instrument as it implies the same thing: In the case of binary options, besides telling which way the market is about to move, one should also look at the expiration date involved as it is critical for the profitability of your option.

Sometimes it is possible to trade binary options using a simple and straight forward correlation strategy and for that a couple of things are required. First of all, correlations can be direct or inversed and one should trade call and put options on two currency pairs, for example, that are inversed correlated. The classical example here goes with the eurusd and usdchf inversed correlation as, because the eurchf peg at the 1.

However, this is not valid anymore as the SNB Swiss National Bank dropped the peg and this made the eurchf to be, again, a free floating currency pair. A risk off environment implies eurusd, gbpusd, audusd, nzdusd moving in the same direction, lower, while usdcad, usdjpy and usdchf higher, so put options for the first category and call options for the second one are recommended.

Trading in a correlated manner implies also avoiding overtrading as this is one of the worst enemies in trading. If market goes against your option during the trading week and until the expiration date and the trader still wants to take a trade then it is advisable to choose a currency pair that is not directly correlated with the currency pair initially traded. For example, if the trader buys a call option on the eurusd and market goes against the trade then it is not wise to trade a gbpusd call option in the same direction as it represents a dual trade and basically forms overtrading.

Is Binary Options Currency Correlation important? Read here!

Correlations can be traded also from a cross and its two majors point of view. The first two currency pairs are majors and the last one is a cross. The cross is moving based on the differences the two majors are making when traveling. Moreover, when there is a trading setup on the cross, in our example on the eurjpy cross, then the thing to do is to compare the cross chart with the two majors chart and look for correlated price action.

In our example, lately, it is obviously the eurjpy is moving closely to the eurusd chart and therefore on a bearish setup on the eurjpy it is advisable to trade either range options, like one touch or boundary for usdjpy pair or put options for eurusd as the eurjpy and eurusd charts recently are the same. Another correlation that is in place and works like a charm for so many years now is the one between the usdjpy and equity indices , like SP or Dow Jones in the United States.

The correlation is a direct one and if, for example, usdjpy is moving to the upside and the equity markets are not confirming the move, then one is lying or it is lagging for the moment. If, on the other hand, they are moving hand in hand then trying to see which one is moving slower and insisting in trading options on that one should be a wise decision.

The two video recordings that are in this article are showing you what to look for when trading with correlations as well as listing the correlated markets and possibilities a binary options trader should take into account regardless the market is trading: FX, stocks, equities, or indices.

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