Trading binary options on volumes
Volume is highly relevant to binary options traders.
Why not trade in the direction the big guys are going and volumes are the ones to show the direction, right?
It can help you identify profitable trading opportunities and avoid bad ones. In detail, this article will answer these questions: What Is Volume? How Can I Measure Volume?
What Is Volume? The volume defines how many units of an asset changed hands during a period.
For example, when you are looking at a price chart with a period of 10 minutes and the the fairest binary options period had a volume of 1, 1, stocks swapped hands during this minute period. The 1, assets could be only one large trade or they could have been 1, separate small trades — the volume would be the same in both cases.
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Volume measures the underlying asset, not the number of binary options. What matters is the overall relationship between demand and supply, and nothing else.
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Also, it is important to understand that it only measures traders who buy or sell an asset. Binary options traders only make predictions about what will happen to the price of an asset, they neither buy nor sell it.
Therefore, the volume ignores binary options. Some newcomers try to use this value to understand which assets are popular with binary options traders.
That is not what the indicator does. Why Is Volume Important? One of them decides to test his luck and places a buy order far below the current market price. The other trader makes the rookie mistake of placing an unlimited sell order. The asset jumps down by 10 percent trading binary options on volumes switches hands.
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Many traders react enthusiastically and place buy orders. As the market opens the next day, all of these orders create a strong surplus of demand, and the market significantly jumps upwards by 3 percent.
In both situations, the market has shown a strong movement. In the first example, it jumped by 10 percent, in the second example only by 3 percent.
Nonetheless, the second example would offer the better trading opportunity. There is almost no chance that the majority of traders will consider this jump justified.
An extremely important metric, it is often overlooked by novice traders. Read this article to understand the concept of volume better and learn how to use it in trading.
It will conflict with the concepts of both technical and fundamental trading binary options on volumes. Consequently, the overwhelming majority of traders will invest against the movement. They will think that now is the right time to take advantage of a market that has moved too far, which is why the market is likely to reverse and eliminate the original price jump.
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In the second example, the price jump was the result of many traders doing the same thing. There is significant support for this movement among traders, and it seems more than likely that other traders will soon make the same investment decision, or that traders who already have invested will invest again. The overwhelming majority will invest in support of the movement, seeing it as the beginning of something big.
How to measure volume?
The movement is likely to last for a long time. Of course, most real-life trading situations will be less black and white than this example.
But the volume can nonetheless help you understand the importance of each single period. When a period has a high volume, its movements are usually more important to future price action than the movements of periods with a lower volume. Even during trends, periods in the main market direction often show a higher volume than periods against main trend direction. By monitoring this, you can understand what is happening.