How to trade Indices with Binary Options – Trading tutorial
Stock trading indices are part of the asset classes that are traded on the binary options platforms. Stock trading indices are assets created to track the performance of a national stock exchange. Trading on stock exchanges is done on the stocks and other ETF instruments listed on any such exchanges. There are stock exchanges in almost every country on earth, but just a portion of that number are listed as stock index assets in the binary options market. By tracking the up-down movements of the individual stocks listed on a stock exchange, traders can benefit from the change in value of each stock index on a day to day basis.
What are the most popular stock trading indices listed for trading on the binary options platforms?
- The US exchanges always come up because of the pivotal role the US economy plays in the global economy. The US stock indices are the Dow (DJ30), Nasdaq (NASDAQ100) and the Standard and Poor’s 500 index (S&P500).
- Japanese index (Nikkei 225)
- Shanghai Stock Exchange (SSE180). This is one of the Chinese stock exchanges.
- Straight Times Index (Singapore)
- Financial Times Straight Exchange (FTSE100) located in London.
- The Xetra DAX index (DAX) located in Germany.
- SMI in Zurich.
- CAC40 (France).
- MICEX10 (Russia).
- Tel Aviv 25 (Israel).
- Bombay SE (India).
- Australian Stock Exchange (ASX200)
- TADWUL (Saudi Arabia)
There are others, and the exact stock indices listed in a platform will depend on the market focus of the brokerage firm.
Unlike the currency assets, stock trading indices are not available for trading all day long. Rather, they can only be traded during the official trading hours of the underlying exchange. The trader must therefore research and get information as to the trading hours of the individual stock indices. As a guide, the following indices can be traded at the following times:
- ASX200 opens between 00.30 GMT and 6am GMT.
- DAX is usually open as from 7.30GMT and closes for business at 3.30pm GMT.
- DJ30 (Dow) is open from 1.30pm GMT to 8pm GMT.
- FTSE100: open from 7.30am GMT to 3.30pm GMT.
- Nikkei 225 is open as from 00.30GMT and 6a, GMT.
Each broker will usually provide its traders with the exact trading times for the listed stock index assets.
Some key elements in trading indices
The first step on the journey to trading stock indices profitably is to pull the charts of the asset to be traded. You can get charts for the Dow, Nasdaq, S&P500, DAX, SMI, CAC40, FTSE100 and ASX200 from the FXCM MT4 trading platform. These charts will be used to analyze trades.
Technical plays on the stock indices usually turn out well. Stock indices have predictable patterns, as they are not subject to some of the wild swings in prices seen with currencies or individual stocks. This is because the assets that are tracked by the stock indices are usually the blue chip stocks, which tend to have steady and more predictable price movements. The trader can therefore use chart patterns, candlestick patterns and technical indicators to pick out profitable price movements. These price movements can therefore be used to trade the Call/Put binary option as well as the Touch/No Touch and range options.
Some indices like the Nikkei 225 can be traded with a great degree of success as it closely mirrors the movement of the DJ30. The US is Japan’s biggest export consumer so it hardly a surprise that the activity of investors on the US markets will have a multiplier effect on the Japanese stock market, which lists companies whose products are used by US companies and consumers. The best time to trade the Nikkei 225 using this correlation is the first few minutes of the open of the Japanese market. The OptionBuilder trade type with its customizable expiry is a suitable option to use.
Trading indices using binary options provides traders with a cheaper and less risky of trading these CFD instruments. It is something that traders in the market should take advantage of.