Binary options are available on various underlying assets: stocks, indices, commodities and currencies. The latter are one of the most important financial products, both within the world of binary options and beyond. For every serious trader it makes sense to know something about the forex market, and there attractive opportunities for binary option traders.
Currencies (or: forex) constitute the world's largest financial market, with a daily turnover of about 4 trillion (!) pounds. The foreign exchange rates are determined by macro-economic developments (fundamentals), and the reaction of investors (sentiment). There are various techniques for predicting the development of exchange rates. The most important are technical analysis and fundamental analysis.
Currency trading in pairs
Currencies are always traded in pairs. That is, you always speculate on the rise (or fall) of one currency relative to another currency. An example is the currency pair GBP/USD. If you buy a call (higher) option on the GBP/USD, then you would expect the pound (GBP) to go up and the US dollar (USD) to go down relative to each other. For any two currencies there is only one pair available. There is therefore no currency pair USD/GBP. Would you like to bet on the GBP against the USD? Then buy a put (lower) option on the GBP/USD.