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Market Regulations and Their Basics

July 16, 2012 | Comments: 0 | Views: 177

All types of market whether money market, capital market, stock market or any other kind of trade market follow similar functioning rules. The rates in these markets depend upon two main factors. One is the demand and supply of goods, and the other is the assumption. To understand it in a better way one must first understand the market forces of demand and supply. Demand of an asset depends on its use and on its future performance so is the supply. That is the availability of that asset in the market. The other force which operates the market is people's assumption about that particular thing.

People assume on the basis of related news circulating in the market. This helps the investors and traders to foresee about that particular asset. How news affects the performance or price of an asset? For example if we talk about currency, the exchange rate of US$ will drop in the currency market if there is a news of political instability in U.S. or peace unsteadiness. Same is the case with shares of products. If there is an expectation of high profits the price of the share will rise.

It is not necessary that price fluctuate each time there is news in the market, but it can affect the commodity in future i.e., The price can show variations in a second, a minute, an hour, a day, a month or more depending upon the effect of news on the market.

Traders earn a profit by purchasing the asset whose demand is likely to be an increase in the near future. That is why both the forces are interdependent. Nowadays, due to binary options whole scenario has changed dramatically. Since the binary options offers live rates to the traders who forecasts the fluctuation in the rates only on the basis of their information and the news revolving in the market. These online rates are offered by brokers to the traders.

Binary options are type of options which offers profits in the form of fixed percentage or value equal to the underlying asset or nothing due to an expiration time. There are two main types of binary options available in the market, In one the investor gets cash as a source of profit or nothing due to expiry of time and the other is where the trader or investor gets the amount which is equal to the security which lies with the company or nothing due to expiration of time limit.

To understand binary option let us consider that Mr. A purchases an option of ABC Corporation and expect (bid) that the stock will go up to the value US$ 300 with a binary profit of US$ 700. Then if on the date when Mr. A expected the value will touch US$ 300 if the stock of ABC Corporation is of price US$ 300 or above he will get US$ 700 and if the stock is trading on a price lower than US$ 300 he will get nothing. This is how the binary option of get cash or get nothing works.

Source: EzineArticles
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