I believe, you probably know, that binary options trading is one of the simplest things accessible to the average trader. When you learn how to trade you will be able to make a good thing of it. However, in order to increase your profit, you should understand that there are certain rules to follow that help you not only make more money, but also reduce the inevitable Losing Trades (even the most bloodthirsty sharks of Wall Street have them) to minimum.
We will not go into the jungle of Technical Analysis and learn to read currency behavior charts, but talk about things that at first glance seem trite but in fact have a few pitfalls. When you learn how to avoid them like a Pro, then you will be drifted to YOUR final destination.
The first thing you as a Beginner should know is what you are making a market of. At first glance, everything is simple. You trade Currency Pairs: EUR/USD, USD/JPY, etc. (I deliberately avoid such derivatives as oil, gas, gold or stocks. We will talk about them at another time). Have you ever wondered what affects these pairs, what are their main characteristics, etc.? That is what this article is about.
There are 5 major currency pairs in the market of Binary Options, Forex and Futures. The so-called Big Club. From the very beginning there were more of them, but with the entry of the Euro on the market, their number decreased. Today we have:
USD – United States dollar – is called “Buck”.
GBP – British Pound Sterling – nickname “Cable”
CHF – Swiss Franc – also known as “Swissy”
JPY – Japanese Yen – no unique nicknames for Samurai.
EUR – Euro – well, Euro as it is.
Let’s take a closer look at them to understand their ins and outs, their main affecting parameters, and how all these factors can work for us.
We’ll begin with the US dollar as the most simple, I would even say trite member of our Big Five Club.
The essence of the US economy comes down to a few simple rules. The Government practically does not intervene in any processes. If someone wants to make money, he will make them. You are the master of the situation. An exception is payment of taxes. Everything else is up to you. That’s why so many beginner businessmen leave for the United States.
Of course, there are huge corporations like Boeing and General Electric, Texas has oil and Alaska has gold, but the main reason of universal love to the Buck – is Government’s non-intervention into the financial activities. Even such a great and terrible organization, the FRS is a private shop, which does not exist in any country of the world.
The next one British pound, that is the most respected currency, I suppose. Only “Swissy” could oppose the “Cable”, but not that long. After two or three rounds in the financial ring, franc will deflate and admit defeat.
There are several reasons to respect the Pound. The first one – this is the legacy of the Great British Empire, which once ruled the world, including the United States. It was in London, as the center of the empire, where all the international corporations with huge concerns established their branches. That is why 70% of all forex and binary options transactions are made during the London trading session (not the New York one). Currency, Raw materials and Stock exchanges carry main transactions during the work in London. Even samurai do the same, despite the great difference in time.
The last, but not the least, reason to respect the Pound is, no doubt, British conservatism. Everything is clear, accurate and stable during the past few centuries.
The third honorable place takes the Swiss franc. There is no secret in this currency. Everyone knows that the Swiss banks hold a lot of money, a small portion of which are so-called “hidden” one, i.e. money secretly exported or sent to Switzerland in order to save, once again, so-called confidentiality. Swiss banks do not cooperate with Interpol and other governments for a long time. If you are concerned about where to keep your money confidentially and inviolable, an expert will advise you to keep them in Austria instead of Switzerland. We will talk about that in another article.
The other two, roughly equal parts are the unclaimed money and Third World countries reserves. Unclaimed money is mostly the money of clients who died during the World War II, overgrown with interests for nearly 80 years, are closed in the vaults of “Credit Suisee”, “Clariden Leu” and etc. Keeping in mind the fact that many descendants of the Nazism victims have moved into another world, one can hardly doubt the stability of the Swiss financial system.
The fourth place takes Japanese Yen. Currency has Oriental mystery and almost defies the logic of Western man. Basically, it’s technical currency, i.e., the most predictable in terms of Technical Analysis based on the fact that Technical Analysis itself was born in Japan in the 16th century. At the very time when Europeans were not fully got off the trees (burned witches and bathed twice in their lifetime), Japanese traders of Rice Stock Exchange had been drawing charts looking for short- and long-term trends. No wonder that the main form of charts representation is called “Candlestick”.
Despite being the technical currency, Yen periodically behaves erratic. The Japanese are not people on common sense, I am likely to assume them as Martian or aliens. No, I did not want to offend anyone. Here is a simple example.
In 2011, during the recent earthquake off the east coast of the Honshu Island, one of the most destructive on the scale and number of victims, the Japanese taught the world a lesson. Admittedly, after such a disaster, the national currency was to fail at once with the long and hard return from pre-crisis level. It would have happened in any other country in the world, but not in Japan. The Yen have subsided for a while, but… now listen and be shocked … then the Emperor himself appeared on National Television asking his subjects to help each other and buy domestically produced products. The emperor asked, the Samurai answered a friendly YES and shortly Yen not only regained its position, but went into growth.
United European currency is in the last place. In fact, Euro is not worth anything. When there were German marks, French francs and Italian lira, the old Europe had the force, but since then many have changed for the worse. The German economy is fine, but even the Germans are not able to help such countries as Portugal and Greece. Europe as a union of states produces nothing but liberal values. Euro is a beautiful wrapper that keeps afloat only due to beginner traders’ belief into the force of Euro.
At this point I would like to finish the first part of our introductory article. The next time we will talk about the causes and factors affecting the currency.
Binary options, currency pairs, profit.