Binary options investors face an increasingly large selection of underlying assets that they can trade. Although there are benefits to having such a wide selection to choose from – some brokers in fact offer more than 350 underlying assets – the variety does prompt the question of which specific ones an investors should concentrate on. The area of concentration really boils down to the temperament, interests and earnings objectives of the individual investor, but in this article we dive into the different asset classes so investors can get a better idea of what is likely best suited to their individual circumstances.
Equities provide a diverse set of individual assets that individuals can trade, and are typically one of the higher volume classes invested in by traders. Within equities, there is a tremendous amount of variety in terms of sectors and the types of stocks. Some stocks, for example, are blue chip stocks and less volatile, while others are growth stocks and highly volatile. Which equities you focus on really should depend on your investment strategy. If you are pursuing a fundamentals-based strategy, you want to make sure you are trading stocks where you are able to access full information about a company’s fundamentals. If you are pursuing a technical strategy, however, you want to make sure that you have access to a long history of granular stock price data.
Currency pairs are another popular asset class, and present investors with a wide variety of profit opportunities. Major currency pairs, such as the USD/EUR and the USD/YEN, are generally quite volatile. As such, if you are able to develop a systematic trading strategy focused on these pairs, you will be well-positioned to lock in substantial gains. As with equities, the strategy that you pursue will probably shape to some extent the specific pairs that you focus on trading. If you are pursuing a ‘global macro’ strategy, seeking to profit from changes in geopolitics and central bank policy decisions, among other macro events, you want to make sure you are focused on currency pairs that are tied to the geographic regions that you are most focused on.
Commodities such as oil, gold and corn can provide an extremely lucrative investment domain for investors who have the dedication to learn about the intricacies of what drives these prices of these assets. In order to excel in commodities, it is generally helpful to have a sound understanding of macroeconomic principles, and to understand that key events that shape the supply and demand of commodities. For example, if you are interested in dealing with oil contracts, you should take the time to learn about how the price of oil is driven by geopolitical forces, such as OPEC policy decisions, as well as key drivers of oil demand such as the US unemployment rate.
As the volume and variety of assets available to trade continues to grow, investors should spend some time figuring out which types are best suited to them. The main thing to remember is that, while investors often spend time in multiple asset classes, some of the most successful investors get ahead by developing a strategy that is highly asset class-centric, and by building a rich understanding of a specific asset class or a specific asset.