When trade in currencies is mentioned outside the context of binary options, the thing that comes to mind is forex trade. In forex trade, investors monitor the trend in the money market and observe the strengthening and weakening of various currencies. Then they consider the factors that are influencing the particular trend. If the factors causing the weakening of a certain currency are likely to persist for some time, traders may decide it is the best time to export goods and services, or even to invoice goods and services already sold out of the country.
The reason is that if the foreign currency is stronger than the local currency, for example the US dollar versus the Japanese yen, it means the Japanese trader is bound to get a lot more money in local currency than when the Japanese yen is stronger. Nevertheless, forex trade is not limited to matters of export and import, or even the literal trade in currencies. Sometimes it generates a lot of activity in binary options trading.
Binary Options Brokers and Currencies
In the same way a binary options broker handles binary options relating to gold, stock indices and so on, the firm also handles predictions relating to exchange rates. In short, an investor can pay a premium and predict that the exchange rate will hit a certain mark at a certain time; and if that happens, the trader wins. So the amount won less the premium paid in advance becomes the investor’s profit.
Advantages of Currency Based Binary Options
Most investors are not rigid when it comes to binary options. Whether they are to trade in bitcoin based binary options or options based on stock indices, it all depends on which ones they believe are easier to predict and more convenient to trade in. When it comes to stocks and currencies, factors like the political environment affect them almost in equal measure. Other factors like ongoing mergers affect mainly stock based binary options. However, when it comes to convenience, currency based binary options are more advantageous because traders can transact any time of day or night as long it is within the period, Monday to Friday.
Time Convenience of Currency Based Binary Options
Anyone, irrespective of their geographical location has an opportunity to trade in currency based binary options. This is not just because the exchange rates of world currencies can be viewed from any location, but also because world time zones are different. This means that when, for instance, most residents in London have returned indoors after close of the day’s business, currency based binary trading is still taking place in the US. On that basis, an investor does not have to watch an opportunity pass if there is a good chance of winning a prediction on a particular exchange rate. One can always engage in predictions of exchange rates from London as they follow the fluctuations in the US.
Effectively then, a binary options trader may wind up trading in London at 4pm local time, but continue trading in the US, predicting currency exchange rate changes within a good range of hours. This is because when it is, for instance, 4pm in London, it is morning in the US. In short, a binary options trader can continue trading from London even in the night as if it is still day time in London.
In contrast, stock trading is more restricted. Since stocks are traded on the particular exchanges on which they are listed, once the day closes in that city, investors can only wait for the following day to engage in trade. It follows, therefore, that binary options brokers cannot base their trading on American stocks when it is night in New York where those stocks are listed. The same argument goes for stocks listed in Tokyo, Japan, London and so on. On the overall, therefore, many binary options brokers can vouch for currency based binary options without reservations.