Thanks to modern technological innovations, there are a wealth of trading strategies available to the average investor. Some methods such as Forex pairs centre around short-term growth. Others including contracts for difference emphasise principles such as leverages and margins. One lesser-known strategy involves a method known as “digital 100 trading”. Let’s take a look at the mechanics behind such trades before highlighting some of the primary benefits.
What is Digital 100 Trading?
Some experts will state that digital 100 trading is the simplest way to understand underlying market principles. This is due to how digital 100 trading takes place. An investor will first predict a specific market event (such as if an index reaches a certain level within a predetermined time frame). If this prediction is correct, he or she will turn a profit.
Let’s look at a typical scenario. Imagine for a moment that you believe the FTSE will finish up at the end of the trading day. Assuming that this prediction comes to pass, you will turn a profit. However, a negative outcome will incur a loss. There are many underlying assets which are relevant to digital 100 trading. Some common options are commodities, indices and Forex pairs.
The Mechanics Behind a Trade
There are four different types of trades which can be made. These include:
Ladder trades involve deciding if the settlement price is predicted to equal or exceed the strike price. If this is highly probable, the trader will buy. Should the settlement price be predicted to fall below the strike price, it is better to sell.
One-touch trades are similar to ladder trades. However, the main difference is that one-touch trading is meant to predict a specific movement before the digital 100-time frame expires. Ladder trades are applicable when the digital 100 expires.
Up/down trades are associated with a single strike price. This price is generally the close of the prior position. A purchase or sale will take place depending upon whether the trader believes that the settlement price is set to finish equal or higher than the previous close.
Range trades are similar to the previous versions; however, in this case, the predicted strike price is set within a range of values as opposed to a discrete number.
All About Modern Flexibility: The CMC Edge
Digital 100 trading is flexible, and as expiration times can be selected based on specific trading strategies, it is a worthwhile venture to consider. Still, your ultimate success or failure will rely heavily upon which online portals you employ. Therefore, it stands to reason that digital 100 trading with a proven provider like CMC Markets is better than going it alone. Not only can you choose from one of the four approaches mentioned above, but you have immediate access to hundreds of different commodities, indices and Forex pairs. Other advantages include automated executions, rebates for high-volume traders and award-winning virtual platforms that will provide you with a competitive edge. If you are contemplating this type of investment, please open up a demo account with CMC Markets to familiarise yourself with the finer points.