Binary options supply works fundamentally different from the supply of conventional assets such as stocks. In this article, you will learn:
- The supply of binary options differs greatly from the supply of conventional assets.
- Understanding the supply of binary options will help you to trade – but understanding the supply of conventional assets will help you trade successfully.
- The relationship between supply and demand is an essential factor to finding profitable trading opportunities.
This article, Binary options supply, will teach you the differences and how you can use them to trade binary options successfully.
How does the binary options supply work?
To find a binary option, you need a binary options broker. These brokers can supply you with all the binary options you like. To help you understand the difference between a binary options broker and a broker for conventional assets, understand these characteristics.
|Where do I get my supply from?||From your broker. You broker permanently updates the payouts it is willing to pay you, and will always supply you with a binary option to these conditions. Supply can never dry out.||From other traders. You broker only works as a mediator. If nobody is currently willing to sell an asset, you can’t buy it. With stocks, the supply of an asset can run dry for days and weeks.|
|Do I have to pay for the supply?||No. With binary options, you have to pay only for your option, but there are no broker fees.||Yes. Your broker will charge you a fee for selling you the stock. This fee adds to your costs and reduces your profit.|
As you can see, there are fundamental differences between the supply in binary options and stocks. Understanding these differences is essential to mastering binary options, but it can also help you to find profitable trading opportunities.
Since binary options allow you to invest in predictions about the underlying asset, understanding the relation between supply and demand in a stock can point you to secure, profitable trading opportunities with that stock.
To make understanding supply and demand easier, traders have created an instrument called technical analysis. Technical analysis ignores all factors about a stock outside the relationship of supply and demand.
Technical analysis is based on a simple premise: a stock price rises exclusively because of the relationship of supply and demand. Therefore, past price movements allow a trader how supply and demand have influenced each other in the past, providing the trader with all the information they need to predict what will happen next.
Instead of trying to understand everything about a company, technical analysis try to find common patterns in a stock’s price movements. Patterns that have led to a certain outcome in the past, so the logic, are highly likely to lead to a similar outcome now, thereby creating a tradable prediction
This type of investing has a number of advantages:
- It allows you to invest in much shorter time frames. Theoretically, there is no limit to how far you can zoom into the market – as long as there are price movements, you can use the technical analysis to find trading opportunities. By analyzing a company’s fundamental values such as profits, you have to wait at least a year to know if you are right.
- It allows you to invest in any environment. By ignoring the question why a price movement happens, the technical analysis allows you to invest in all types of price movements. With a fundamental approach, a generally pessimistic economic outlook might conflict with a positive prognosis for a company, making it difficult to predict which influence will be stronger on the asset’s price. By solely focusing on supply and demand, technical analysis can make this decision easy for you.
Understanding how supply works both in binary options and in conventional assets, you can gain a deep insight into the market. Train your skills of predicting the relationship of supply and demand, and you are close to becoming a successful binary options trader.