How to trade stocks with Binary Options – Tutorial
Trading stocks involves the buying and selling of shares of a company. Company ownership is shared out among individuals on the basis of their equity holdings in the firm. In addition to the portion of ownership reserved for the primary shareholders and company owners, there is a portion of equity that is reserved for trading in the secondary market; the so-called free float. This is the portion that is exchanged from one person to the other, usually on the basis of capital appreciation.
Stock Market Operations
Stocks can be traded on the primary market and the secondary market, and also in the binary options market. The primary market is where public offers are purchased. Trading stocks on the secondary markets is done on the floor of the various stock exchanges across the globe. Even stocks that are bought as public offerings will eventually find their way to the secondary market when investors are legally allowed to demobilize their stocks.
In the binary options market, trading stocks goes beyond trying to gain from the upward or downward movement of the prices. It involves trading the behavior of the stock in question:
- Will the price of a stock be range-bound or will experience a breakout within a particular time frame?
- Will the stock be higher or lower than a particular price after a few hours or days or weeks?
- Is there a price barrier that the stock is expected to touch within a particular time frame or will the stock miss out touching that price? Is the stock more likely to touch a price level more than another?
- Will a particular stock outperform its peers within a particular time? It is actually possible to trade the performance of a stock with another.
These are the questions that those who engage in the business of trading stocks in the binary options market seek to answer whenever they take up positions in the market.
The stock offered for trading in the binary options market will differ from broker to broker. There are brokers who will classify stocks according to regions, and there are those who will list stocks randomly. However, most binary options brokers will list the following stocks for trading:
- Major banking stocks like HSBC, Goldman Sachs, Barclays, Lloyds, Sberbank, etc.
- Telecom stocks such as France Telecom, Turkcell, etc.
- Petroleum marketing stocks such as Petrobras, Lukoil, Gazprom.
- Automobile companies such as Nissan, Toyota, etc.
Depending on where the trader is located, he may decide to trade stocks from a particular region or may decide to trade them randomly.
Procedures for Trading Stocks on the Binary Options Market
The first step a trader should take when the decision to trade stocks has been made is to open a trading account with a binary options broker. Most brokers in the binary options market listed on this site will accept $200 as minimum account opening balance.
Then follows the process of account opening via filling an account opening form, submitting a proof of address (utility bill or bank account statement) and proof of identity (national ID card or international passport) to get the account activated, commences.
Once the account is active, the trader funds the account and starts trading, using knowledge acquired about the trading process to buy and sell stocks.
In trading stocks, traders will basically be looking at factors that can trigger a sharp rise or drop in the price of a stock. For instance, events like solid earnings, a drop in losses following some pretty bad loss positions, a revolutionary product with great market potential or the appointment of a new CEO with a track record of pulling off impossible company turnarounds, are events that will spark demand and buying volume in an asset. When the reverse happens, investors will sell off the affected stock(s) and this will depress its price. Earnings reports alone can be a very profitable season for trading stock binary options once the trader has understood how to use the information that they provide. These events can be used to trade the High/Low option as well as the Touch/No Touch option.
Binary options provide an easier entry process into stock trading for beginners. So traders should identify which of the pathways would be most suitable for them when it comes to trading stocks.