Cryptocurrencies and binary options - faster and more profitable?
The statement that we live in a very rapidly changing world has long been a truism. It is another matter that people by nature are quite conservative, and it is very difficult to move a person. But it is simply impossible to ignore the changes that are taking place around us, including in profit-making technologies.
Profit in half the time
At one time, one of the favorite sayings of Sberbank employees was a quote from Alice in Wonderland: "You have to run as fast as you can to stay in place, but to get somewhere, you have to run at least twice as fast.
A couple of decades ago, trading was very conservative and more like classic "buy-and-hold" investing. However, now there are products that allow you to make a fairly quick profit on the basis of the classic rules of trading.
Today we will talk about two tools that are suitable for extracting exactly operating profitBinary options and cryptocurrencies. The main thing is to remember that no one cancelled the laws of economics, and often such profits are accompanied by high risks of loss of funds.
Yes, let's not argue that cryptocurrencies can also be seen as a source of more conservative, investment income. But we would be deceiving ourselves if we consider cryptocurrencies only from an investment perspective, given the inherent volatility of cryptocurrencies. Let's start with binary options.
What are binary options?
The definition of a binary option is very simple and can be found in almost any economic literature on derivatives or derivative financial instruments. We will give you one of them.
Binary option - covenantIn this case, the option seller agrees to pay the buyer a certain amount of money if a specified event occurs by the time the option is exercised. If that event does not occur, the writer of the option pays nothing to the buyer.
The event that occurs at the time of execution of the option can be absolutely any. In general, it is the movement of the price of the selected asset by the trader above or below a certain price value.
It looks like this:
- the trader chooses a convenient financial asset. As in the case of other derivatives, such an asset can be currency pairs, the same cryptocurrencies, stocks, stock indexes, commodities... In short, almost anything.
- After choosing an asset, the trader specifies the amount - in fact, the price of the option, and the time during which the option will be valid.
- After that, it is necessary to correctly predict the direction of the asset's movement. As with the opening of a "long" or "short" position with exchange instruments, to make a profit, the trader must correctly determine whether the selected asset will fall or rise.
- After the transaction, the price of the asset is fixed. Drawing an analogy with a classic option, this is the strike price.
- If by the time the option expires, the trader has correctly predicted the direction of price movement, then he receives a fixed percentage of profit to his option price. If he was wrong, then the lost amount is 100% of the option price. Therefore, as in the classical trading the following formula works here: higher risk - higher profitability, lower risk - lower profitability.
Making Profits with Binary Options
In general, there are two options for correctly predicting price movements and, consequently, profits in binary options.
- The first option assumes proactive market analysis fundamental and technical methods for predicting short- and medium-term market behavior.
- The second option, in our opinion, is more popular among traders and involves two main advantages of binary options - time and distanceThe price of the selected asset must "pass through" (we will talk about these advantages below).
The second option is called trading "on the news". The fact is that quite often the market reacts not to long-term macroeconomic forecasts, but to momentary events.
Here is a simple example of trades on the news
The news about the good growth of Russian economy (high GDP) will be perceived positively in the market. And traders are likely to buy the Russian ruble, which will lead to its growth against other currencies.
This movement can be very short-term and almost elusive for a non-professional. However, for a trader working with binary options, it can become a real "gold mine" (if, of course, such a trader learns how to correctly assess certain events).
News about economic growth, inflation, unemployment and other macroeconomic indicators are released all the time. The timing of such news on 99% is known in advance and is reflected in special economic calendars. Using these calendars, traders trade binary options short-term up or down depending on their assessment of the situation.
Advantages and disadvantages of binary options in terms of profits
There is no denying that binary options are a very controversial instrument. But the same can be said about almost any financial instrument used in speculative trading. And before we move on to cryptocurrency, we will talk about the pros and cons of binary options. Let's start with their negative sides.
Cons of binary options
High risks of capital loss
Yes, statistics are merciless. Just as in trading on the stock market, the currency market or the derivatives market, there is a very high probability of losing your money. The simplicity of binary options does not cancel out their riskiness, so to think that they can be a source of "easy money" is naive, to say the least.
Time factor
Alas, there are plenty of tools for predicting so-called price movement targets (e.g., "fair price" in fundamental analysis or support/resistance levels in technical analysis). But there are very few time prediction tools in both types of analysis. Even having correctly predicted the direction of the asset movement, the trader can make a mistake with the time, which in binary options is critical and can lead to losses.
Lack of regulation
Indeed, the binary options industry in Russia is not regulated by anyone. This means that for the trader the issues of protection of his funds and frequently arising conflicts of interest "broker-trader" also come to the fore.
Pros of binary
Simplicity and accessibility of the mechanics of binary options
To understand the principle of placing a deal and making a profit, in fact, is not difficult. In addition, the range of assets on which binary options can be purchased is very wide: stocks of both Russian and foreign companies, any indices and any currencies, etc.
Transaction costs
Imagine that you want to buy shares in a company. Unfortunately, you have to be prepared for the fact that the purchase of securities will lead to associated costs. First and foremost, there are the commissions Binary options broker for the purchase and in some cases a depository fee for recording securities. Binary options eliminate such commissions and your associated costs will be zero.
Time
Yes, we remember that it is written down by us in the disadvantages of options. But, on the other hand, it is also their advantage. What other financial instrument, except binary options, will allow to earn, for example, 100% of the invested amount in just one minute?
Trading "on the news", which we talked about earlier, implies the possibility to use a very short reaction time of the market to macroeconomic events. For binary options, this is quite enough to make you money.
Distance
If you've been trading before, you probably know that your income is directly related to the distance the price "travels. But what if an asset that you thought was promising and bought for your portfolio only moved up a couple of percent? It's quite possible that this move won't even cover transaction costs.
In binary options, however, this is excluded. The profit a trader makes does not depend in any way on the distance the price travels.
That is, if the direction of the asset is predicted correctly, it is enough the slightest price change in the direction desired by the trader.
Undoubtedly, the binary options industry will continue to be attractive for both beginners and professional traders. But just not so long ago, another product appeared which aroused the genuine interest of many people - cryptocurrencies.
Approaches to making money from cryptocurrencies
The cryptocurrency market, of course, has a number of features compared to more mature, mature markets: increased volatility, less liquidity, the possibility of super profits.
However, if we consider the general principles of profit making, working with cryptocurrencies is not much different from investing or speculating in other assets.
Hold is not for crypto
There is the "hold" (or "holding") investment approachIn which the user buys a cryptocurrency and "forgets" about it. He does not trade, but simply waits for a long time while the asset grows in value. However, in today's reality, this is certainly not the best strategy. The market is just starting to develop, and there's no guarantee that coins can survive price volatility.
A striking example is the dynamics of the bitcoin benchmark. After the strongest growth in 2017, when its value exceeded $19,000 in December, bitcoin went down sharply. Already in February 2018, the value of the coin was only $5700.
Now imagine how the "holders" who bought the coin at the peak price in December 2017 feel now (unless they are Zen Buddhists, of course)?
Portfolio and rebalancing
The optimal solution for an investor is to create a cryptocurrency portfolio and constantly adapt it to market realities.
Because of the fluctuations in the rate of digital money, the situation in the market is constantly changing. That's why more it is profitable to conduct regular rebalancing of the portfolioadapting to the situation in the industry than simply holding on to an asset for a long time.
Moreover, the more often the rebalancing occurs, the greater the profit. If you adjust the portfolio every day, the yield will be almost five (!) times higherthan in the case of adapting once a month. However, this scenario of working with digital money is not suitable for everyone. It requires large investments and professional knowledge and experience.
Cryptotrading
Another approach to profit from cryptocurrencies is trading or speculating on price differences. It is available to both beginners and professionals. And here the high volatility of digital money, which complicates an investor's life, will only help the trader.
With this approach, you don't have to deal with the physical purchase and storage of coins. You only need to choose a brokerYou have to use a person that you trust and spend some time studying and analyzing the market.
The advantages of this approachThe following are some of the most popular trading instruments: the ability to trade every day, low entry threshold and a wide range of trading instruments - from classic "" type margin trading to fixed-income digital options. As they say, for all tastes and possibilities.
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See also
Of course, options are faster, but do not forget that they have very little relation to the stock market, as the professionals say it is the kitchen of the stock market, the earnings on them, as well as on Forex is simple - you need to guess where the chart will go up or down, but if the Forex, you through technical analysis, But in Forex you can really forecast the chart movement and earn money, but in options it is not, where you guessed the chart will suddenly start to fall, or where it will suddenly go down, as many people say, it is a new type of casino, which, of course, sometimes gives the chance to win, especially to traders that give signals, get a percentage from the losses of their referrals. As for crypto, alas, the one who started collecting it about 5 years ago and successfully sold it when it went up, there is no other way to make money on it.
Making money on forex is easy? Do you trade?