Understanding Binary Option Signals
Investors, day traders and other participants in the financial exchanges rely on certain inputs or information stimuli for the purpose of taking a position in the market. These inputs are known as trading signals, and they are used by investors who trade just about any kind of financial instrument. From stocks to commodities and from currency pairs to derivatives, trading signals help investors to gain a better understanding of the markets they participate in.
When it comes to binary options, trading signals tend to be very straightforward and easy to use. In the United States, binary options trading signals have been generated and compiled since the Chicago Board Options Exchange (CBOE) adopted these instruments in 2008. As with other financial instruments, trading signals for binary options prompt investors to take certain positions that emulate previously successful trades.
Trading Signals Provide Informal Advice
Trading signals are essentially pieces of information that provide informal advice to investors about market conditions. Depending on the instrument and the information provider, trading signals may be the result of algorithmic analysis of market data and factors. The end result that is delivered to traders is a piece of information with regard to a favorable time to take a certain position in the market.
Binary options are not terribly complex financial contracts, and thus the information provided by their trading signals is likewise simplified. A binary option trading signal will typically contain the following recommendations:
- The underlying asset of the contract
- The best time to take the position
- The type of trade
- The expiration date and time
In essence, a binary option trading signal indicates an opportunity for profit. Trading signal providers often rely on the analysis of technical factors that influence the market, but many also take into account statistics, fundamentals and current events. In a sense, providers of trading signals offer a service that greatly simplifies the lives of binary options traders and gives them an opportunity to become profitable as they learn the intricacies of the market.
How Trading Signals Are Delivered
The frequency and delivery mode of binary options will vary according to the underlying assets and the plans offered by different providers. High-frequency day traders may choose to receive hourly signals directly on their mobile phones via SMS, but investors who enjoy going long on their call options may prefer to get a couple of signals a week via email.
The pricing of trading signal subscriptions may very from a few cents per signal received to a few dollars. Some binary options brokers partner with providers who may offer free signals as an added benefit for their clients.
The most important aspect of trading signals that traders of binary options must always keep in mind is that they are informal recommendations. Signal services do not come from market-timing machines; they are the result of careful analysis on markets that are always subject to human whim and psyche.