Trading Binary Options BitCoin – Introduction and Rules of Engagement
Trading BitCoin Binary Options – What you Need to Know
Bitcoin is growing in use and worldwide acceptance. The digital currency is being mined by servers around the world while businesses and investors cause wild swings in the underlying value. Trading Bitcoin is now getting a foothold in the Binary Options industry.
In order to dig deeper into this new trend I had to first do a little research on Bitcoin itself. The digital currency, which is mined by data servers, is based on an algorithm that allows only so many of them to be created. I understand the theory behind what a Bitcoin is and how it is created, but I still can’t wrap my head around the fact that people are actually using them. Even more, the fact that well know internationally based businesses are using them too. To me, Bitcoins are very scary. I can’t help but think that at some point in the future the world governments are going to have to address the issues in defense of their sovereign currencies. Until then Bitcoin may be providing a profitable avenue for highly savvy Binary Options traders.
Where Can I Trade BitCoin Binary Options?
In order to focus this article down a bit I will be using the TradeRush and Anyoption platforms for reference. These are not the only brokers who offer Bitcoin options, but they are among the most well known. TradeRush has Bitcoin listed among the other currencies and is traded in the pair Bitcoin/USD. On Anyoption the options are listed on a separate page. Traderush options are traded just like regular Forex Binary Options with high/low positions, but there is only one expiration per day from what I have found. On Anyoption’s platform the Bitcoin options are traded in lots at $50 per with preset strikes and expiries. The expiries occur twice per month, once in the middle and once at the end with two high and two low strikes available at each strike. (I would like to point out that the Anyoption style of Bitcoin trading is very similar to, but not exactly like, trading 0-100 style Binary Options).
In order to trade Bitcoin options you will first have to answer this question; do you want to day trade Bitcoin or do you want to use near to short term signals? The answer will be the difference between using one broker or the other. Of course, to really harness the power of the Bitcoin market, you may have to use both brokers. The answer is also a little more complicated because of how the options are traded on each platform. Both are basically the same high/low position, but with the traders you buy into a spot position and with Anyoption you buy a preset strike. Just to be perfectly clear a spot position means that whatever the price of the Bitcoin is at the time of the option purchase is your strike price.
Now the question to be answered is can you really trade Bitcoin options? What I mean is, is there a way to analyze the price action of the Bitcoins in a way that will allow you to make good trading decisions? I have to admit that yes, there is. You can find a fantastic chart of Bitcoin versus the U.S. dollar on the Bitcoin website. It is customizable, includes all the commonly used technical indicators and can be displayed in candles, oh yeah! Take a look at the chart below. I have applied my typical indicators of 30 and 150 day EMA’s, MACD and Stochastic. Based on my analysis at the time this screen shot was taken it looks as if the Bitcoin may be in a downtrend. However, there is potential support at the $700 level. If the asset can hold onto this level a bottom/consolidation could form. If the support level does not hold look to $600 and $500 as the next likely areas for prices to hold.
How Should I Trade Binary Options BitCoin?
What strategies should you use to trade Bitcoin? I think you could use just about any technique you want, provided it is a good one to start with. The caveat is that this is still a new asset, it is highly volatile and its future is more than uncertain. It may not behave the same way as other assets you may be trading. No one really knows if it will last, no one really knows how it is affected by changing central bank policy. It is well known that the world’s central banks can alter foreign exchange rates through policy change, it only makes sense to think that a change in policy would have an impact on Bitcoin as well. I think that for now using Bitcoin for short term options is still way to risky for newbies because of the amount of volatility in the market. I would recommend to anyone that you first watch the market for a while until you get a grip on how it moves and then start trading.
Further Discussion:
- Join the BitCoin Binary Options Forums Discussion