Perhaps the best way how to define what are underlying assets in binary options would be to simply say they are the building blocks. Without underlying assets binary options trading could not be possible.
Due to huge interest and popularity of binary options trading, more and more South Africans are looking to make use of the potential this manner of trading provides.
Accordingly, the interest in underlying assets is also growing as traders are aware they need to know as much as possible before the actual trading process starts.
In this guide, we will introduce traders in South Africa with the most common types of underlying assets in binary options.
We will also provide more details about each underlying asset type and indicate the differences between them which could be important for a profitable trading journey in binary options.
Underlying Asset Types in Binary Options
Underlying assets in binary options are financial instruments on which derivative prices are based.
Since binary options trading is known for its versatility, South Africans will often find binary brokers who offer more than 200 underlying assets which can be used in the trading process.
The first things newbie South African traders have to know concerns underlying asset types in binary options. With most brokers traders will find four standard groups of stocks, indices, commodities and currencies.
Each of the underlying assets is different and behaves differently on the financial market.
Because of that, South African traders who wish to join the ranks of those who trade binaries profitably have to invest time to learn as much as possible about what are underlying assets and how to use them effectively in binary options trading.
To initiate the binary options trading process several things need to happen. Traders have to select the underlying asset, invest their funds, predict the most likely price movement and pick trade option and expiry time.
With a majority of established brokers such as 24option or IQ Option, traders will be able to use additional trading tools and features like demo account or mobile app.
Each broker is different when it comes to features and tools they provide so traders have to do their own research or simply check detailed broker reviews we provide on our site.
Alongside this, it is also advisable to use various trading strategies and to have a well-constructed trading plan.
How to Pick an Underlying Asset?
In binary options trading, everything starts with the underlying asset and the estimate of price direction. This is what makes binary options trading such a unique and attractive prospect – simplicity combined with the prospect of lucrative winnings.
Still, simplicity does not exclude continual learning and knowledge upgrade. It will take some time to learn how to correctly interpret available data in order to make a correct prediction about the direction of the underlying asset price.
The same can be said in response to the question of how to pick an underlying asset. The four asset groups we have listed here are all unique and each behaves differently on the market.
This is due to the fact that different factors affect these financial instruments. An event on the market can make one underlying asset price skyrocket while it will do little or absolutely nothing for the other one.
For South Africans who are serious about binary options trading frequenting sites such as ours can truly make a huge difference. Here, traders can find a multitude of great materials designed to help and guide them along the trading process.
Yes, anybody can trade binary options – a housewife, a university professor or street vendor- but not all will be equally successful.
And no, it is not about luck. It is about the time and effort put into understanding the basic principles of trading binaries and the continual adding of new data to the existing one.
That is the key and that is how South African traders will learn how to pick the underlying asset they wish to trade.
That is also how they will prevent serious loss of funds as well. As traders will see in our final paragraph, some of the underlying assets are more popular than the other and some are riskier.
All this info plays a huge part in the decision-making process.
That would imply that until traders gain more knowledge and experience, it might be wiser to select underlying assets which are more stable and less risk-prone.
Stocks in Binary Options Trading
Counted among most popular underlying assets in binary options, stocks can be a good starting point for new traders in South Africa.
They are pretty easy to follow because of the abundance of info available.
Most popular stocks include Twitter, Apple, Coca-Cola, Microsoft, Facebook, Google or Nike.
The benefit of trading stocks in binary options is in the fact that there is no need to actually buy the stock but rather make a prediction about the price direction.
Commodity Trading – South Africa
Even if traders never heard about commodities they are actually well-acquainted with them as we are actually referring to the goods that have been around for thousands of years.
Goods like corn, oil, coffee, wheat, gold and silver are just a few most common ones.
While trading commodities can be very exciting, South Africans should also keep in mind that commodities are risky too. This is due to their nature as there are many aspects which can influence this underlying asset like political situations, weather conditions or demographics.
We advise novice traders to properly research commodities if they wish to trade them and start slowly since it will take skill and time to master trading them.
Trading Indices in Binary Options
Indices are known as the most stable underlying asset in binary options trading. Their stability is directly linked to the fact that this type of underlying asset is not as affected by the by the market events.
Correspondingly, the risk factor is lower with trading indices but so are the profits.
Indices South African traders will most likely find with numerous binary brokers include Dow Jones, Dax, Nasdaq, S&P 500 and FTSE 100.
Currency Trading in South African Market
Probably the most popular among underlying assets in binary options, currencies are usually the first choice for newbie traders in South Africa but globally as well.
Binary brokers usually offer a generous list of currency pairs for binary trading and, predictably, most popular currencies are EUR, GBP and USD.
South African traders can use several trade options such as High/Low and a variety of expiry times. Trading currencies can be a great way to start trading binaries.
With time, more knowledge and experience, the best approach to trading binaries is to diversify the trades and test various underlying asset.