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Gold Prices for Last 10 Years (Google Chart)

In the last 10 years,  gold has risen steadily (see chart on side), breaking an all-time previous high of $1,241 an ounce on May 12. Due to the Greek crisis, foreign investors are cautious about investing in the Euro and prefer to invest in the seemingly more stable commodity of gold.

The price of gold, like other commodities is affected by demand and supply. However, since the total amount of gold in the world is already mined and currently in existence, the price of gold is affected more by demand than other commodities. For the right price, market suppliers can sell gold in the marketplace.

But the sudden growth in demand for gold could also contribute to global inflation, especially in light of the current global crisis and the European Central’s bank’s surprising decision to buy bonds of weak government economies. Investors are currently speculating as to whether gold will continue to rise, or if it truly did hit the breaking point on Wednesday.

Gold and other commodities are offered as investment options on our binary options platform.

Below are a list of a few myths and facts you may have heard about binary options:

• It’s just based on luck.- MYTH Not really. Although last-minute changes in the price of the instrument are inevitable, there are strategies that you can learn to manage risk and increase your chances of gaining money. Our blog includes links and resources  for learning more about binary options and some of the strategies shown to help traders minimize risk.
•  I have to be an expert on finance and stocks in order to invest in binary options. - MYTH If you have the right personality, binary options trading can be a great way to increase your earnings. You need to be determined, patient, and willing to invest time and effort to learn about binary trading. But compared to the conventional market, you don’t have to be an expert.  In fact, binary options were in part designed as a simpler investment alternative to traditional investment.  Of course, if you are a financial expert you are ahead of the game. Our Markets Pulse blog and platform offers you lots of information to start from, and we will in time recommend more information for advanced binary options traders.
• Great. So anyone can do it.- FACT Anyone CAN do it. Binary options trading, however, is not for those of the gambling mentality, who want to arbitrarily select calls and puts all day long. These people will lose a lot of money. See #2 for more information on the amount of effort needed to become a binary options trader.
• It is boring to predict whether a stock rises or falls within an hour. - MYTH Nothing could be further from the truth! Prices of binaries can change at a moment’s notice, due to various market changes. There are different types of binary options, which you can read about on our blog: http://blog.marketspulse.com/?p=14 In addition, our platform will introduce exotic options in the near future, which offers more advanced alternatives to the traditional call and put system.
• I need a lot of money in order to start.- MYTH You can start trading with as little as $100.
• The commissions for buying binary options are high. – MYTH Markets Pulse does not charge commission fees. Most of the online brokers don’t charge commission fees. Find a broker that doesn’t charge these fees and gives a protection rate.
• It’s an easy way to make money.-  FACT See #2 for more information on the personality needed to succeed in binary options. Again, binary options trading are not for the faint of heart. But with some research and knowledge of the industry, you can earn money.
• Binary options are short-term options, expiring within the day or within an hour.-FACT Yes, binary options are short-term, and are used for intraday trading and even hour-long trades.
• I have to first lose a lot of money in order to “get the hang of it.” – MYTH Markets Pulse offers you to join and start trading with practice money. It is strongly advisable to do this before placing actual bets. You will minimize risk.
• Binary options are a relatively new form of trading and the simplest form out there. – FACT Indeed.  Binary options have only been out for the past two or three years. But they have taken off and are growing more and more popular by the day. They are simpler than the traditional methods of investing.

This strategy benefits you mostly when you have two options with a range of expiry, where both options could be in the-money. Then you are able to minimize your risk but   also maximize your gain.

This option is almost most popular in forex binary options, in which the value of the currency can change very quickly in either direction. In this scenario, hedging could be a viable option for reducing risk to the trader.

Take the following scenario of a forex binary option based on the price of the Euro. The Euro has been rising and is predicted to continue to rise at a determined breakout point. At this point you would place a call, expecting the Euro to rise. But what if the price changes quickly and falls? You can place a put option at another point, helping you to minimize risk in the event that the price indeed falls.

In the above scenario, you have placed a call for $500 at the option price of 5.1. You have also placed a put for $500 at the option price of 5.3.

The following outcomes could occur:

• The Euro price could expire at 5.1 exactly, making your call option at-the-money. You would receive $500 in return of your initial investment. In this case your put option would be in-the-money, and you would receive $850 on your initial investment. Total investment= $1000. Profit= $350. This trade would end up being a net gain. (-500 + 500 + -500 + 850)
• The Euro price could expire between 5.1 and  5.3, making both your put option and your call option in-the-money. You would receive $850 for both trades.  Total investment= $1000. Profit= $700.   (-500 + 850 + -500 + 850) This trade would end up being a net gain.
• The Euro price could expire below 5.1, making your call option out-of-the-money. You would receive $75 in return of your initial investment. In this case your put option would be in-the-money, and you would receive $850 on your initial investment. Total investment= $1000. Profit= – $75.   (-500 + 75 + -500 + 850) This trade would end up being a net loss, but you still lose much less than you stand to gain in other scenarios.
• The Euro price could expire above 5.3, making your call option at-the-money, and you would receive $850 in return of your initial investment. In this case your put option would be out-of-the-money, and you would receive $75 in return of your initial investment. Total investment- $1000. Profit= -$75.  (-500 + 850 + -500 + 75) This trade would end up being a net loss, but you still lose much less than you stand to gain in other scenarios.
• The Euro price could expire at 5.3 exactly, making your put option at-the-money. You would receive $500 in return of your initial investment. In this case your put option would be in-the-money, and you would receive $850 on your initial investment. Total investment= $1000. Profit= $350.  (-500 + 850 + -500 +  500) This trade would end up being a net gain.

In each scenario, you stand a chance of winning a greater profit by hedging, or placing two bets in opposite directions, than the all-or-nothing chances of one binary bet. In the instances in which you stand you lose money, you lose far less than the possibility you have to gain a greater profit than loss in other circumstances.