A pair is a relatively newcomer to the world of binary options, but they are gaining quickly in popularity. In fact, you are probably already quite familiar with the concept of a pair through your familiarity with Forex and currency pairs. Essentially, a currency pair is already a pair, pitting one currency against another, such as we see with the EUR/USD pair. When you trade this, you are not guessing whether a single asset will go up or down in price, but how much and in what direction the relationship between the euro and the U.S. dollar will change.
Pairs take this concept, and expand it to other assets. One of the most popular applications of this is within stocks, especially when it comes to similar stocks or stocks within the same sector. This could include two tech stocks, for example, such as Apple and Microsoft. When given this choice, your next step is to determine which will move the most in a particular direction over the given timeframe. In theory, this is simple. As you’ll see, it’s not that easy to turn a profit here.
You might even see a stock paired against the index that it is housed in. For example, if you see Apple and NASDAQ paired together, you will be tasked with determining which one of these will be the bigger mover for the day, either up or down. Most brokers ask you to pick both the asset and the direction, although there is some variety here. Or, you might see two very dissimilar assets paired, such as Facebook and Gold. Whatever the pairings that you find, the goal is the same: determine which asset is going to be the strongest mover in your direction of choice.
This isn’t quite as easy as it sounds. To be successful with this kind of trading, not only do you need to do all of the analysis that you would do for your normal binary options trades and the timeframe that you are trading it at, but you would need to do this for both of the assets involved. Needless to say, if you are unfamiliar with one of the assets, then this type of trade, no matter how appealing, is going to be a lot more difficult for you to be successful with. These work best when you have done thorough research for both assets involved over an extended period of time, and would be equally comfortable trading both alone, as well as both in a pair.
For traders that specialize in a certain type of asset, this is both a good and a bad thing. As you saw earlier, many brokers like to pair similar assets together. So, if you specialize in tech stocks and your broker pairs a few different tech stocks together, then this is perfect. But if you specialize in tech stocks and Apple is paired against Silver, this trade opportunity will be a lot less profitable to you over the long run. There still might be a money making opportunity available to you here, you will just need to be a lot more cautious than you might want to be.
Pairs are a unique form of binary options trading, and they have a lot of potential to help you enhance your profitability. But like all trades, they carry risk with them. They also require you to have a broader base of knowledge than a typical call and put option would need, and you need to have strong analysis skills. If you are not fully prepared for this type of trading, there’s a strong chance that you can lose money. Avoid this by being ready before you ever execute your first real money pair trade.