Binary Trading Glossary
Asset
Assets are financial instruments which are traded in the binary options markets.
At the Money
This term indicates a neutral outcome from a trade. In this situation asset value on expiry is same as on purchasing. In simple words, there is no gain or loss for the trader.
Boundary
This is an instrument which allows a trader to decide if the underlying asset’s value would be inside or outside of a specific range at expiry time. It is also known as range instrument.
Call Option
It is a kind of binary option which becomes profitable when the underlying asset’s unit price rises above the strike price of it at expiry time.
Charting
This is a tool which is used to draw the plot of price of an option at successive points in time. It helps carry out technical analysis.
Commodities
Raw materials or grown goods such as gold, oil, silver, coffee and sugar are called commodities.
Currency Pair
It is a quotation of the relative value of a currency against another currency in the Forex market.
Demo Trading
In demo trading, a demo account is funded with simulated money that allows a trader to do trades. This way a new trader becomes well familiar with ins and outs of a platform.
Expiry Time
It is the point of time when a binary option expires. It is also called Expiration. Each binary option has a predetermined expiration.
Forex
Forex is the abbreviated form of the term foreign exchange. It is the most traded market in the world. Its average turnover is more than 4 trillion dollars daily. Forex market is the largest financial market of the world.
Fundamental Analysis
It is a method in which macroeconomic data as well as financial data are used to forecast the prices of underlying assets. Inflation, unemployment rates and interest rates are the examples of macroeconomic signals. Financial factors are characteristics of banking sector.
GMT
GMT stands for Greenwich Mean Time and it is a time zone that is used in many countries including European and African countries.
High
An option about which a traders assumes that an underlying asset would expire at a price which is higher than target price.
Index
An index comprises different stocks. Dow Jones Industrial Average, Nikkei 225 and S&P 500 are the examples of index. Value of an index reflects the prices of securities underlying.
In The Money
This term describes a binary option which is profitable for a trader. A call option will be in the money, if the price of underlying asset at expiry time is greater than its strike price.
Low
An option in which a trader assumes that an underlying asset would expire at a price lower than target price.
Market Price
The current quoted price of a binary option’s underlying asset is called Market Price.
These are indicators that traders use to see moving averages of underlying assets price movements.
Out of the Money
This term is used to describe a binary option which is not profitable for a trader. A call option will be called out of the money when its underlying asset’s price at expiry time is lesser than the strike price of it. A put option will be called out of the money when the price of asset at expiry time is more than the strike price of it.
Pip
Pip stands for Price Interest Point. It measures the change in exchange rate for a currency pair or some other underlying asset.
Put Option
It is a kind of binary option which becomes profitable the underlying asset’s unit price falls below the strike price of it at expiry time.
Range Option
It is a kind of binary option for which traders forecast if the price of underlying asset would end within a specified range of price or it would end out of it. It is also known as boundary option.
Refund
It is the amount of money that is refunded to an investor when an option is expired at the money.
Return
It is the amount that is returned to an investor when an option is expired in the money. Example: Mr. X invests $1,000 with an 80% payout, his return would be $1,800.
Risk Free Trades
This is a kind of trading in which investors have a chance to invest in binary options without any risk. If a trader places a risk free trade and its result is negative, the broker will have to cover the trader’s loss. But if result is according to the wish of the trader, he will keep all profit that results from the risk free trade.
Stock
The term stock refers to shares of a company listed on a stock exchange.
Strike Price
It is the price of an underlying asset at the time when a binary option is exercised.
Technical Analysis
This is a method in which previous market data is used to identify trends and to anticipate the future prices of underlying assets. In this method signals such as trading volume and price are charted to check the future probabilities.
Tick
Minimum downward or upward movement in the price of a security. This term is also used to refer to the change in a security’s price from trade to trade.
Touch / No Touch Binary Option
It is a kind of binary option for which a trader forecasts as to if the price of underlying asset would reach a specific target price before expiry time. A touch binary option is called to be in the money if the price of an asset reaches the target, even if it drops below before expiration. No Touch Binary Option is called to be in the money if the price of an asset cannot reach the target.
Underlying Asset
A financial instrument, a security or a commodity that is represented in a derivative. Purchasing an option contract, option holders secure their rights to sell or buy the underlying assets.
UTC
UTC is not a time zone but it is a time standard which is the basis for civil time and time zones across the world.