Binary options trading is undoubtedly a very widespread and common method of online trading, thanks to the fact that it is easy to master even for those who have no previous experience in trading. However, despite the simplicity of the concept itself, in order to be successful in trading binary options, it is necessary to devote a lot of time to various activities. You need to learn economic terms and skills you will need for the trading process, such as reading the charts, economic calendars and spreadsheets. You need to be constantly informed on how the assets you trade behave on the market and what position they take, which involves reading various news and bulletins. Lastly, the trading itself requires a certain amount of time during the day, especially if you make binary trading your only source of income.
Because of all this, it is necessary to organize your time well, in order not to waste it, but to still be able to perform all the trading-related activities efficiently enough. Before you even decide to start trading, it is clever to first devote some time every day to learn the basics – binary options terms, types of options, reading the charts etc. Use this time to explore the brokers, read the reviews and comments from other users, in order to choose a reliable broker that offers conditions suitable for you.
After this, when you start the very trading, it is advisable to set the specific time of day for this activity, and to predetermine how long it will last. The part of the day and the duration of your daily trading sessions should be determined according to several criteria – your habits and the amount of free time you have every day, your working hours if you are employed, your daily chores and the assets you wish to trade, because not all assets are available for trading at all times. Create your plan based on these criteria and determine how much time you are willing and able to spend on binary trading every day.
Make the determined daily trading period your daily routine and do not interrupt it with other activities (unless it is inevitable, of course). It is important not to get distracted and interrupted, because it is one of the factors that influence your success in trading. Just like in any other activity, you will need all the concentration you can get. If you get interrupted or you need to skip a day of trading, you can consider using a binary robot, preferably one which has a limit of the invested and lost money, such as Binary Option Robot, so that it can do the trading for you without losing more money that you intended.
This kind of trading, with predetermined and limited trading period, is advisable for several reasons. First, it is created in accordance with your other activities, so it does not interfere with them, which gives you more concentration and devotion to the trading, but also to all your other daily activities. Then, it prevents you from trading too long or trying to make up for the loss, which are the situations that can be frustrating and turn binary trading more into gambling than trading sessions. Lastly, it provides you with a routine that is easy to follow, where you will always devote your time to the same or similar trading assets, which can largely improve your success.
This article in which we will talk about some aspects of financial branch known as accounting will have its focus on concepts and uses of accounting. So, to skip lengthy introduction we will go straight to accounting concepts.
Every accounting report has to be based on certain time period. In order to be able to compare the data from multiple reports those time periods have to be continuous and same for every report of the same design and purpose. Periods that are used in there are called accounting periods and usual time frame they cover is one year, from the first of January up until the 31st December. But this is not something that is set in stone, so accounting periods can be made for shorter periods, a month, quarter of a year or half a year, it doesn’t matter as long as they have same amount of time in every report. Main reason behind accounting reports is to be able to see what how business has been doing in which time periods, and whether the business profitability went up or down in one or another period.
Business has to considered as an independent entity, no matter what type of ownership there is. In fact records of all transactions must be held and taken, even between the business and the sole owner of it. When an owner takes some money from a business to his own personal purposes that transaction should be recorded as a loan ( if it was done out of normal salary ). This concept of work is quite useful in businesses which have multiple owners, in which case it makes it easier to track all money that goes through the business. But it can be useful for one owner type businesses, because taking out money may result in issues at the report later, which will show irregular expenses which won’t be easily pinpointed. Some of those expenses may be due to owner, but part of them may be something else that sucks out money from that business.
All assets that belong to the business should be recorded in the books by their cost price (how much they cost). It is a mistake to record them on their market price because prices on market change on daily basis and they will not show a right picture of the business. Main reason behind this concept is depreciation and its reduction over time, which can be incorrectly calculated if an assets price is recorded on market price at the present time.
Profit and loss can be calculated by taking all incomes and deducting all expenses from them. This can be achieved with proper accounting and bookkeeping. If either of them is not exact in their part, final number will not represent real result of business.
Accounting is hard and somewhat complex area to master. But by mastering it you will gain knowledge that will serve you well in the future. For example you will never trust binary option robot software because you will be aware of requirements of proper analysis.
Volatility, when it comes to options, represents statistical measurement of price changes of the asset where high changes in certain time period equals high volatility. Volatility will increase the price of the option that is based on said asset, increasing the option premiums. Reason behind this is increased chance of an option going into the money if a volatility is higher. Low volatility of the asset means that there is smaller chance of greater price change and the chance of that option going into money is low.
Every option premium consists of two parts, time and intrinsic value and volatility can only affect time value part of it. The size of the change ir reflected in the amount of time left before the option expires. Less time there is smaller the effect of volatility and vice versa. Very high volatility value means higher chance of total turnover if the option. In-the-money option can easily go out-of-the-money and the other way around.
Volatility can’t be pinned down to exact number but it has in influence of the price of the option, when it is used along with:
Strike price which must be in relation to asset price
Time that remains until option expires
Interest rates which with their height change premium size
And dividends, higher dividends will lower the call premium and increase put premium.
Implied volatility is something else even though it is calculated nearly in same fashion as it is normal volatility, but there are differences. Main difference is in their actual existence and size. While volatility has its own reason for going up or down, implied volatility can go either way even though the price of the asset remains same. This is due to the simple fact that implied volatility represents difference between demand and supply.
Implied volatility is not bound by time essence, they are not made for present or for future they are simply the representation of current market price of the premium of the option that is calculated. Implied volatility is not just some representation of past events for it, no connection exists between those two. Byt small indirect connection do exist and it is through option premium. As it is already well known that historical volatility can indeed have great effect on price of the option premium. And as we have already explained implied volatility is affected by that same price.
Due to the aforementioned statement in which I explained you that implied volatility represents supply versus demands it also important to explain more about that. This is done because supply and demand of the option is taken into the calculation, not supply and demand of the asset that represents the trade object. There is a simple way to look at the implied volatility, in that the height of it can be two things only, an over-priced or under-priced, if we take in consideration other factors of the price.