Glossary Of Terms From The World Of Binary Options

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Glossary Of Terms From The World Of Binary Options

Submitting documents (identity verification)

In order to be able to withdraw money from your trading account, a commission CySEC that regulates all brokers (basically all brokers that can be found on our list of binary options brokers) requires documents confirming their identity.

The documents are following:

  • Picture of an ID
  • Picture of Gas, electricity, phone bill or a bank statement
  • Picture of the credit card (with your details covered)

This practise is quite common and there is no need to be afraid. The reason is that every trader needs to be 18 years or older and to make a deposit, a card with the same name needs to be used.

The picture of an invoice or a bank statement is required in order to confirm your address.

Financial Conduct Authority (Used to be called FSA) is a regulatory body that controls financial services in the UK and takes care of the stability of the financial sector as well as the customer’s safety.

Deposit bonuses

Bonus is the value that a trader can obtain extra to his first deposit. The greater the initial deposit, the bigger the bonus is offered by brokers. Bonuses differ from broker to broker, but most are between 20% – 100%. Every bonus has to be wagered in order to be withdrawn, so it’s basically NOT free money as some might think.

Bonus wagering

The word wager means “to make trades in value” and can be found in articles and terms and conditions about bonuses. When a brokers offer a bonus, you always have to make trades in x-times the value of the bonus in ordet to be able to withdraw it – wager.

Let’s say that a broker gives you a bonus, i.e.: $100 and if the wagering requirement is 30X, you have to place trades for at least $3000, in order to withdraw the bonus, but that’ll be quite easy with all our advice.

A pip

A pip is the smallest possible movement that an asset can make, whether it’s up or down. If the price of EUR/USD is 1.33610 and it changes to 1.33611, it means that it’s moved by 1 pip. However, not all assets have 5 decimals. For example USD/JPY usually has 2 decimals, so a movement of 0.01 would mean a change by1 pip.

In the case of binary options, all we need to know is that if the price, in the expiration time, is higher or lower by one single pip that you’ve predicted then the trade is considered successful or in-the-money. That’s all it takes for your trade to be profitable

Expiration time

Expiration time is a period or time at which the options expire or we evaluate whether the trade has been successful or in other words in-the-money. Expiration times usually range from 30 seconds to couple of hours, but some brokers offer trading for longer periods of time (ie. months).

The longer the expiration time, the easier we can predict the development of the market, however this rule usually applies to the expiration times under a week.

Strike price

Strike price(initial price, buying price, opening price) is the value of an asset (index, stock, commody or currency pair) at the beginning of the trade, just when the trade is opened. Expiration price is the opposite.

Forex

Forex is an abbreviation for Foreign Exchange. It’s a trade with foreign currencies, for example USD/EUR. Of course, there are many more, so it’s important with what trader you are collaborating, because not everyone offers all of them.

Brief history of Forex

Trade as such has been part of the mankind for a very long time. Before we started to use money as a currency, trading has been done in a form of an exchange, therefore trading goods directly. With the inventions of money as a currency there has also been a need to change different currencies – in the past, it has been precious metal(silver and gold) as a method for currency conversion. Since 1971, FOREX is used as a way of trading currency pairs.

Forex as such, is not an institution with a proper building like a classic stock market. It is “only” a worldwide connected computer web, where millions of traders can see a 24-hour course development of individual currency pairs.

A SCAM

We can consider a scam certain brokers that are not trustworthy and might cheat their customers, for example: zoomtrader. A scam can also be called a website that offer immense and absurd numbers, attracts you with super cars, houses and beautiful women. Yuck!

You can find some reviews of binary options scams on this website.

An asset

An Asset or an instrument is basically what we trade with – it can be gold, silver, Facebook stocks or currency pairs EUR/USD. Some brokers (Olymp Trade or IQ Option) offer more than 1000 assets to be traded.

Drawdown

In the world of trading, drawdown means the biggest decline of your capital. So, if you’ve made 100 trades for $10, out of which 80 finished in-money and the other 20 were somehow spread in the 80, the maximum drawdown will follow at the end of the largest series of lost trades, i.e.: if out of the 20, 6 were in a row, the maximum drawdown was $60.

The graph shows the sample amount of capital (vertical) to the number of months spent trading (horizontal). We can see that we, in the beginning, have suffered a 50% drawdown, from which we’ve recovered and at the end of the trade we’ve experienced another decline of 20%. Therefore the biggest decline was 25 000.

Breakeven ratio

Breakeven ratio is a percentage number that indicates how many trades are to be won in order to achieve long-term profit. With binary options brokers with a profit of 80% (average profit), it’s about 56% – this means that if your long-term profit of all your trades is going to be more then 56% with the same amount, you’ll be making a lot of money and losing none.

CySEC

CySec (Cyprus Securities and Exchange Commission) is a regulatory authority from Cyprus. It ensure that investment firms(brokers) adhere to strict laws and regulations.

CySEC duties include:

  1. Supervising and controlling licensed investment services companies
  2. Carrying out inspections over brokers and brokerage firms.
  3. Granting operational licences to investment firms

CySEC official website can be found here: CySEC.

Price action

Price action is a type of technical analysis and is based on the price movement. The difference between price action and technical analysis is that you don’t use any additional indicators when trading price actions. An example of price action trading is using trend lines or support and resistance trading.

Timeframe

Graph’s time frame; position traders will use, for example, day charts where one candle represents the change of a price in one day. This is called daily time frame.

Intra-day traders use an intra-day time frame, for example M15 (1 candle=15 minutes) or M5.

Binary Options Glossary

In order to achieve success in binary options trading, you need to have a firm understanding of the terms and concepts frequently used in the industry. Without adequate knowledge of the words or phrases used in trading options, it will be very difficult for you or for any trader to enter this industry with ease.

Most binary options brokers offer their own versions of a binary options glossary. This is where you’ll find all the terms used in trading binary options. With this helpful resource, we aim to give you a well-rounded idea on what this industry is and how it works.

The contents of a binary options glossary

As we’ve mentioned earlier, you opt to have a full grasp of the nature of ZoomTrader binary options trading , its unique characteristics, and the basics of how to trade binary options. Though it doesn’t involve a step by step procedure on how to trade assets, it gives you the definitions of the words you may encounter when you enter this industry.

A binary options glossary may contain information about trading concepts and some account-related terms. The contents differ from broker to broker, depending on what a certain broker thinks would be necessary for a trader to get familiar with.

The concepts and terms are usually alphabetized to make it easier for you to find a specific word or phrase. Moreover, this allows you to connect different terms that are related to each other, and form a concrete perspective of what a word or phrase is all about. Some of the common terms you’ll find in a binary trading glossary include the “asset”, “in-the-money” or “out-of-the-money”, and “binary options” among others.

Asset index and binary options

Using our ZoomTrader binary options glossary , you can find the difference of various assets and some examples of each. Our intuitive trading platform provides you with the definitions of the common asset classes. These are the Currency Pairs, Indices, Stocks, and Commodities. You can learn about each of these asset classes and familiarize yourself with them.

Once you get to know these various assets, you can gain more confidence in trading them. Moreover, you better interpret the movement of certain assets after sufficient research of these underlying assets.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Best Choice For Beginners and Middle-Leveled Traders!
    Free Demo Account!
    Free Trading Education!
    Big Sign-Up Bonus!

  • Binomo
    Binomo

    Trustful Broker. Recommended Only For Experienced Traders!

We also give you the various types of binary options available for you in our platform. You can find in our glossary the features that distinguish one binary option type form another. In fact, we have four binary options type that you can all try. These are the classic High/Low, One Touch, and Boundary trading types. We have the more advanced Short Term trade type as well.

Aside from the ZoomTrader assets and binary options, you can also learn about our platform’s expiry rates and rules as well as bid prices. These concepts are very essential, especially to new traders.

Accessibility of the binary trading glossary

You can find our extensive binary options glossary in our website. It’s available for all of our traders to use. We keep it updated with the latest developments in binary options trading so that our traders will always get ahead of the game with their knowledge of what’s new in the industry.

Binary Options Glossary

To someone first venturing into the world of binary options trading, the sheer number of unfamiliar words and terms might sometimes be bewildering. Below are a few of the most common terms new traders often have problems with.

Asset – The underlying instrument on which the trade is based, e.g. a currency, a stock or a
commodity.

At the Money. This describes an option where the current price of the underlying asset
equals the option’s strike price.

Broker. The company providing the trading platform needed to trade binary options.
Traditionally a broker is only an intermediary between the so-called market maker and the
client, but with Binary Options the broker is usually also the market maker, i.e they actually
issue the Binary Options.

Call Option. A kind of binary option that pays out if the price of the underlying asset
increases to above the option’s strike price.

Charting. The plotting of an asset or an option’s price at regular time intervals, e.g. hourly,
daily or weekly.

Commodities. Basic consumables that are either mined, e.g. gold, or grown, e.g. rice.

Currency Pair. A foreign exchange rate in terms of which the value of one currency is
expressed in terms of another currency. An example is the Euro/USD exchange rate.

EMA/Exponential Moving Average. A modified moving average where more weight is given
to the latest prices.

Expiration. The time at which the option expires.

In the Money. This describes an option where the price of the underlying is greater than the
strike price of the option, in the case of call options and below the price of the option in the
case of put options.

Index or Indices. The weighted average of a basket of share prices, e.g. the biggest 500
companies in a country. The S&P 500 is such an index.

Out of the Money. This is the opposite of an In the Money binary option. In this case the
price of the underlying asset is beneath the strike price of the option in the case of call options
or above the price of the option in the case of put options.

Put Options. A type of binary option that pays out when the price of the underlying asset
falls beneath the strike price of the option at expiration.

Range or Boundary Binary Option. This type of binary option pays out if the trader can
correctly predict whether the value of the underlying asset will fall within a certain range at
expiration or not.

Refund or Rebate. This describes the practise whereby the broker/market maker refunds the
trader a certain percentage of the initial premium even when he/she is wrong and the binary
options therefore end Out of the Money.

Strike Price. The price that the underlying asset must reach before or at expiration for the
option to expire In the Money.

Technical Analysis. The statistical analysis of past price movements in an attempt to predict
future price movements.

Security. See Asset.

Touch/No Touch Binary Option. A type of binary option that pays out if the price of the
underlying touches or does not touch a particular price level before expiration.

Trading Minimum. The smallest amount at which binary options can be traded at a particular
broker.

About the Author

Marcus Holland – Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Best Choice For Beginners and Middle-Leveled Traders!
    Free Demo Account!
    Free Trading Education!
    Big Sign-Up Bonus!

  • Binomo
    Binomo

    Trustful Broker. Recommended Only For Experienced Traders!

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