Here’s a binary options dictionary for the benefit of newbies. This binary options dictionary will be constantly expanding and new definitions will be added to it.
Binary Options Dictionary
Asset: Otherwise known as the underlying asset; an ownership agreement on a digital option which gives binary option investors the right to buy or sell based on a predetermined agreement.
ATM: At The Money; a tie.
Bearish market: One of the three possible market conditions where the overall market conditions are decreasing in value and heading in a downward direction. Indicates to investors that the bears are in control of the markets.
Binary broker bonus incentive: Cash bonuses offered by binary option brokers as an incentive for signing up and depositing with their broker. Oftentimes these bonuses come with account restrictions where the depositor cannot execute a withdrawal until a predetermined volume of traders have been met.
Binary broker review: Reviews regarding the legitimacy of a binary options broker that are conducted by individuals or organizations that discuss the advantages, disadvantages and requirements regarding a particular binary options broker. You are welcome to check out our blog of objective binary options reviews.
Binary options: An option in which investors have the ability to execute an investment based of a fixed amount of compensation. A simple a yes or no proposition option where investors predict whether they believe the price of a particular asset will be higher or lower by a predetermined time period for a fixed amount.
Binary option signals: Trading signals generated by an individual, group or organization of binary option investors where signals are sent out via email, SMS, Skype or a web-based webinar. Many binary option signal services lack the ability to deliver consistent or profitable trading signals, for a list of comprehensive list of reliable and profitable signals please feel free to visit our Recommended Signal Services.
Binary options software: An automated or manual trading software programmed with the intention of increasing an investors ability to make more accurate predictions when placing binary option investments.
Boundary options: A form of binary options investing where investors have to predict whether the value of an asset will be stay in-between two predefined levels or if the option will expiry outside the predefined boundary levels.
Bullish market: One of the three possible market conditions where the overall market conditions are increasing in value and heading in an upward direction. Indicates to investors that the bulls are in control of the markets.
Call option: A prediction executed by investors where they believe the value of an asset will be higher than its strike rate within a predetermined time period.
Candlestick charting: A technical analysis based trading interface that shows real-time charts and are mainly utilized by binary option investors who rely on technical trading indicators in order to make a more accurate prediction about the market.
Charting solution: A software or website in which binary option traders have the ability to watch and analyze the live feed of a particular trading asset while adding indicators and changing plotting methods. MetaTrader 4, MetaTrader 5, thinkorswim and FreeStockCharts are among the most popular charting solutions.
Close now: A limited option offered by some binary option trading platforms where investors have the ability to close out an investment before the predetermined option expires. Oftentimes used by binary option investors who made an inaccurate prediction on the market to limit their losses.
Commodities: Assets that are categorized as raw materials such as Gold, Silver, Oil, Corn and Wheat.
Contract for Difference (CFD): An agreement between the broker and the client for the purpose of exchanging the difference in value of a particular underlying financial asset from the time the contract has been opened until the time the contract has been closed.
Correlation analysis: A form of trading analysis where investors take correlating assets and make a prediction based off of their predictions. Correlating assets can have a strong or negative correlation to one another, depending on their correlation investors can oftentimes accurately predict the future direction of another asset without having to analyze it.
Deposits: A form of funding your trading account with a binary options broker where you must deposit.
Digital options: Options that have three possible results; mostly referred as binary options.
Donchian Channel Indicator: A simple trend-following indicator that plots the highest high and lowest low over the selected period time. When price merges within the upper Donchian channel, investors should look to place a PUT investment, whereas if price merges with the lower Donchian channel line, day-traders should look at placing a CALL investment.
Double up: A feature which allows you to replicate a trader. Once you double up a specific trade, the same trade will be automatically placed with a new entry price. Even on platforms where this feature doesn’t exist, you can still double up by manually opening a new trade within the same parameters.
EOD: End Of Day; a trade that expires at the end of the trading day.
Expiry: The expiration time and date of a binary options contract.
Fencing/Hedging: Placing two trades with the same expiry and on the same asset, one is a PUT while the other is a CALL. You will be betting that the price will expiry within your fence, that is lower than your PUT entry SR and higher than your CALL entry SR.
Fundamental analysis: A form of trading analysis that requires the studying of economic factors that may indirectly affect the price value of particular assets. Requires the investor to analyze an asset’s financial health, competition and news relation.
Futures: Not necessarily an asset but rather a contract in which binary option investors predict whether the price of the future will increase or decrease by a predetermined time period.
GMT: Greenwich Mean Time; the time zone most commonly used in binary options trading.
Instrument: Investing term broadly used to represent an asset or a technical trading indicator.
International Financial Services Commission (IFSC): A government agency within Belize that is responsible for financial regulation. The IFSC regulates all financial market exchanges, participants and is responsible for setting and enforcing all financial regulations.
ITM: In-The-Money; a winning trade.
Long-term: A long term trade that oftentimes expires in no less than 4 hours and can last as long as an entire year.
Market sentiment: Refers to a composite overview reflected by a wide number of investors in regards to their predictions for the future performance of an underlying asset, a class of similar assets or overall future in regards to the financial market.
Momentum Indicator: Just as the term sounds, the momentum indicator is a technical analysis indicator that helps day-traders better gauge and understand the momentum associated with a particular asset.
Nadex: A binary options exchange offering a variation of binary options investing that has a Forex trading format; known as the North American Derivatives Exchange.
N/A: Not applicable; a signal no one was able to enter usually due to the price of the asset quickly moving in the predicted direction.
NFP (Nonfarm payrolls): A statistic that represents the payroll of all paid US workers of any business except farm employees, general government employees, private household employees and employees of some nonprofit organizations. NFP is reported on the first Friday of every month and it can be used to predict economical changes.
No touch: A form of binary options investing where investors predict whether the price of a particular asset will exceed or fail to reach a predetermined price level.
Neutral trend: One of the three market conditions where the overall market conditions are neither increasing or decreasing in value. Indicates to investors that neither the bulls or bears are in control of the markets.
One touch options: A form of binary options investing where binary option traders predict whether they believe the price of a particular asset will surpass a predetermined price level. This form of investing is among the most difficult to accurately predict which is why payouts range from 150% to 750%.
Order flow: The direct derivative of Price Action; the summation of all buy and sell orders executed during any duration of time.
Option refund: The cumulative amount of cash given back to the investor once the option has expired.
OTM: Out of The Money; a losing trade.
Pairs: A mode of binary options trading available with some platforms in which are you betting on the relative level of performance between two assets instead of on the price movement of a single asset as is the case with regular binary options.
Paper trade: An instruction common in signals to use a free binary options demo.
Payout: The predetermined cash value given back to an investor once a binary options contract has expired.
Put: A prediction executed by the investors where they believe the value of asset will be lower than its strike rate within a predetermined time period.
Range option: A form of binary options investing where traders predict whether they believe the price value of an asset will fall within two different predetermined price levels. Range options are exceptionally common among binary option investors who use hedging or fencing trading approaches.
Relative Strength Index (RSI) Indicator: A momentum oscillator that measures the change of price movements (volatility) in correlation with the speed of price action. When RSI is above the value of 70, the targeted asset is considered overbought, whereas when the value of the RSI indicator is at a value of 30 or below, it typically indicates to investors that the asset is oversold.
Resistance Level: An imaginary level where the sellers establish control over an asset which results in price “bouncing” and creating a price barrier which then heads back down in a bearish direction.
Reuters: One of the largest financial data providers that provide the live rates and feed of all the assets that compose the financial markets.
Rollover: A feature that allows you to extend your expiry time for a particular trade and requires that you add a certain percentage to your investment.
Signal: A trading tip which includes an asset, an expiry time in GMT, PUT/CALL, SR, and other instructions that may apply.
SpotOption: a technological company which provides one of the most popular binary options trading platforms. Many Brokers use this platform. They also offer a free binary options demo (not available in the US and a few other countries).
SR: Strike Rate. In the context of binary options trading signals, this is the value of an asset at the time of entering the trade. When following a PUT signal, you need your entry to be equal or higher than the specified SR. When following a CALL signal, you need your entry SR to be equal to or lower than the specified SR.
SSL: A form of cyber security offered by most binary options brokers also known as encrypted security. Helps keep your personal and financial information safe.
Stocks: Confirms that the stockholder owns equity of a company. In reference to binary options, investors simply just need to accurately predict whether they believe the price of a stock will be higher than lower than it’s Strike Rate by a predetermined time period.
Support level: Most commonly applied in Price Action Trading Pattern; an imaginary level created when the price of a particular asset bounces off the exact price level during the order flow of an asset. It’s a level where the buyers reestablish control over an asset which results in price “bouncing” and creating a price barrier which then heads up a bullish (upward) direction.
Swing Point: The occurrence and creation of either a support or resistance level; it is the supportive or resistive price barrier that is created.
Technical analysis: A form of trading analysis that requires the use of a charting solution and sometimes the implementation of various trading indicators and financial instruments. If you’re interested in learning technical analysis, please check out my list of recommended binary options trading patterns.
Touch options: A form of binary options investing where investors must accurately predict whether they believe the price of an asset will touch two predetermined price levels. If the option fails to touch one of the two price levels your investment expires OTM.
Trader choice: A fundamental trading tool that is designed to accurately reflect the market sentiment in regards to particular underlying assets.
Turbo: Very short-term trade, usually 5 minutes or less.
Volatility: The ability of a particular asset to be inadvertently affected by minor fluctuations that may occur in the financial markets.
Volume: In reference to binary options the cumulative number of contracts traded during a given market session.
Withdrawals: Process of executing some or all of your funds out of your trading account to reach your desired banking account.