Dictionary of Binary Options Terms

Beginners who have begun to master earnings on binary options are faced with a large number of special terms. Specialized concepts are actively used in teaching materials. Therefore, in order to effectively master the fundamentals of trading and specific trading strategies, it is necessary to learn the meanings of the main terms. There are a large number of special words used by Forex and binary options traders, but this article will only cover the most important of them.

Definition of key terms

All screenshots are taken from the trading platform of the Binomo broker.

1. Option

is a transaction concluded on the broker’s platform for the purpose of making a profit. There are several types of options, the most popular are binary options. They were so named because of their duality: fixed profit or loss.

If a trader bets on a fall in the rate, then the option “Down” (PUT) is purchased, otherwise, when prices are expected to rise, the option “Up” (CALL) is purchased. In addition to classic options, some brokers offer other types of transactions, but they are less popular.

Option
Option

2. Expiration

is the duration of a trading operation in the market. This parameter is set by the trader, it determines how long the option will be open. By the time the expiration period expires, the transaction is closed, profit or loss is fixed. The indicator can vary from 30 seconds to a year. It depends on the conditions of the broker.


Expiration
Expiration

3. Assets

is the name of the instrument for trading. Brokers offer currency pairs, company shares, stock indices, cryptocurrencies, commodities. Each of the assets has its own characteristics, which should be taken into account when trading binary options according to the rules of specific strategies.

Assets
Assets

4. Well

is an indicator of the value of a particular asset (quotes). If a pair does not specify a separate currency, then the price is taken into account in US dollars. The trader’s task is to correctly predict the change in the asset’s rate from the moment the option is purchased to the expiration point of the transaction.


Well
Well

5. Investment (rate)

is the amount of money spent on purchasing the option. The percentage of profit on a trading operation is calculated based on the amount of invested funds.

Investment (rate)
Investment (rate)

6. Schedule

is a graphical representation of quotes in chronological order, displaying past values ​​for a certain period. There are 4 main modes for displaying asset charts: Japanese candlesticks, line, mountain or bars. Technical analysis indicators and various auto shapes can be superimposed on it: lines, rays, grids, levels, etc.


Schedule
Schedule

7. Timeframe

is the time interval of the graph. The number of units of time that fits in one price formation — a candlestick, a bar, one tick of a line chart. The lower the interval, the more chaotically the price moves. The most effective forecasts are built on medium and large timeframes.

Timeframe
Timeframe

8. Trend

this is a steady movement in the price of an asset in a certain direction: a decrease or increase in the exchange rate, or a neutral phase. When prices rise, bulls dominate the market, and when prices fall, bears dominate. So among themselves, traders call different market participants who trade on opposite trends. Earnings on the stock exchange is possible only due to the fact that quotes are constantly changing. Traders learn in time to recognize hidden signals about the beginning of a new movement and the termination of an existing one.


Trend
Trend

9. Technical analysis

is a set of tools and rules that are aimed at analyzing the currency chart. It is based on established models of market behavior in the form of a reaction to certain situations. The analysis is carried out on the asset chart using indicators and auxiliary drawing tools.

Technical analysis
Technical analysis

10. Indicators

These are algorithms that carry out automatic mathematical calculations according to certain formulas. The past price values ​​from the chart are taken as initial data. Therefore, no indicator can predict the future with any guarantee. It gives the result of historical data analysis. However, taking into account the recurring patterns of market behavior, using indicators, you can easily predict the most likely scenario for price behavior in the near future.


Indicators
Indicators

11. Fundamental analysis

this is a technique for making forecasts regarding price behavior in the near future based on the analysis of information that affects the economic component of specific states. Beginners are advised to use the Economic Calendar service for this purpose.

Fundamental analysis
Fundamental analysis

Additional terms:

  • broker — a company providing a platform for trading;
  • trader — a person who trades on the stock exchange;
  • terminal — an application (including a web version) where options are traded;
  • volatility — the intensity of fluctuations in the asset’s rate over a certain time;
  • candlestick pattern — a graphical model that is formed on the chart, foreshadowing a movement either up or down;

The article discussed the basic terms, the meaning of which every novice trader should know. As you master binary options trading, your vocabulary will inevitably be replenished with new highly specialized concepts.

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