5 Types of Binary Options Trades
The most basic type of binary option trade is the High/Low trade, but did you know there are other ways to trade binary options? Some brokers will only offer you that most basic type of trade, but others such as 24Option provide a number of different trade types. Being able to trade in different ways is both fun and useful. It adds some variety to your trading, which is great if you’re trading for entertainment. But it also allows you to approach the market in new ways and to become profitable during different market conditions, which is extremely useful if you are trading for profit.
Here are five different types of binary options trades which may be offered by your broker.
High/Low trades are also called Call/Put trades, and sometimes Up/Down trades. With this most basic type of binary options trade, you look at a given asset, and then you decide whether that asset will be trading above or below its current price at the close of the expiry period. You simply choose an asset, choose a direction, and then wait and see what happens. High/Low trades may have long expiry times or short expiry times, ranging anywhere from one minute to several days or possibly longer.
Here is an example of a High/Low trade:
You believe that the price of gold will go up by the end of the trading day, so you look up gold on your trading platform. You see a High/Low trade available with an expiry period of several hours, near the close of the trading day. Determining that gold is probably going to close above its present trading price based on your trading system, you enter into the High/Low trade and pick “High” or “Up” as the direction of the trade. You wait several hours, the price of gold goes up, and you win 75% of your investment.
The advantage of High/Low trading is that these binary options are very simple and easy for a beginner to understand. They are great for profiting in trending markets or from breakout patterns. The main disadvantage is not being able to choose your own expiry times, but with platforms offering Option Builder, you are able to do this.
2.One Touch/No Touch
This is another very common trade type. With a One Touch trade, there is a “trigger point,” which is simply a price value somewhere above or below the current price value of an asset. You are wagering that price will touch that trigger point within the expiry period. No Touch is a simple variation where you wager price will not touch the trigger point within the expiry period. These trades are directional, since the trigger point lies in one direction or another, but they are also more specific than High/Low trades. They may offer larger payouts.
Here is an example:
You have been watching the Google stock and you believe that the stock is going to soar within the next couple of hours following an investor’s call. You specifically believe it will reach a particular price before dropping back down. You place a One Touch trade on the Google stock, wagering it will touch that price within the next two hours. Following the investor’s call, optimism drives the stock up, it touches the value you specified, and you make money because the option has not yet expired.
Here is another example:
EUR/USD has been ranging for a while, and despite the fact that there are some conflicting signals, your trading system tells you there is not going to be a breakout of price anytime soon. You enter into a No Touch option, wagering that price will not touch a certain value within the next hour. Sure enough, EUR/USD continues to range, and you win your payout.
If you are familiar with the concept of channels as a technical analysis tool, then you can easily visualize what a boundary trade is. Price often ranges within certain lines of support and resistance which can be drawn over top and bottom of minor movements. When you draw two lines enclosing price like this, you call it a channel. A channel may be horizontal, or it may angle upward or downward, depending on whether price is flat or trending. Even trending prices tend to move within specified channels up or own as defined by their retracements and corrections.
With a boundary trade, you are making a kind of double No Touch trade, stating that the price of a given asset will continue to trade within two specified boundaries. In a sense, you are defining a channel, and then wagering that price will respect the channel in question.
Let’s look at an example of a boundary trade:
GBP/JPY has been ranging horizontally for days now, and you have been unable to find any indication of a breakout anytime in the near future. You have been frustrated with the lack of good One Touch or Up/Down trades available, because GBP/JPY refuses to do anything except fake you out in either direction. Fortunately, your broker offers you boundary trades. In your charting software, you have drawn lines which define a channel. Support and resistance have been tested multiple times and have held, and there are no trend signals.
You enter into a boundary trade on this currency pair, wagering it will continue to trade within the channel you have identified for the next day. GBP/JPY continues to range choppily, never breaking out of the channel. You specify points just beyond the channel boundaries for your trade, so that even when price tests support or resistance, you don’t lose out on a price spike. When the trade expires, you are in-the-money and receive the payout.
Boundary trades are a wonderful way to profit in markets which otherwise would pose some real difficulties to a trader. Most traders do best in markets which are trending, and struggle to do well when markets range. Once you have been trading or testing a while, though, you are bound to notice that the majority of the time, the market is not trending. Being able to profit when the market is quiet is a great opportunity. Even in choppy, untrustworthy conditions, you might be able to profit with boundary trades.
4. 60 Second Trades
60 Second trades are a specific type of High/Low binary options trade which takes place over a very short time frame. As the name implies, each 60 Second trade lasts for one minute before expiring. The trades work the same way in all other respects as any other type of High/Low trade. Why are they set aside as a special trade type? The skills required to be successful trading 60 Second options are somewhat unique. There are many challenges posed by trading fast which you do not need to deal with when you trade over longer time periods.
Here is an example of a 60 Second trade:
You are watching the charts for oil in real time, and a price action signal tells you that oil is about to break out and start trading up—in the next 60 seconds. You have your trading platform open in front of you as well. Pulling up oil, you see a 60-second option available with an expiry in one minute. You quickly input the proper amount you wish to trade, execute the trade, and wait for one tense minute to see what will happen. The price of oil indeed jumps up, and 60 seconds later you win.
60 Second trades are not for everyone. It should be emphasized that the majority of binary options traders will be unsuccessful with any type of trading, but most of all with 60 Second options. It takes a very fast, level-headed, thorough person to trade options like these quickly without making mistakes. Not everyone can handle sitting at their computers constantly searching for trade opportunities for hours at a time either. And there is also a real temptation to start gambling; when the action is fast, you can get caught up in your emotions and lose sight of the bigger picture. Click here to clarify if 60 second trades are gambling….
The benefits of trading 60 Second options are pretty obvious however; you have the potential to profit extremely fast for one thing. For another, the payouts can be huge. A website which offers an average payout of 75% on other trade types will sometimes offer as much as 500% on winning 60 Second options. Imagine being able to win five times the amount of your investment in just one minute!
5.Stock Pair Trades
One more exciting type of binary options trade is stock pair trading. Right now the only broker which offers this type of trading is StockPair.com. With this type of trade, you profit off of the relative price movements of two stocks. You can even make money when both stocks are losing money!
Here is an example so you can see how it works:
You have been keeping up with the internet giant wars, and you have reason to believe that Google’s stock will outperform Facebook’s this week, even though both stocks have been dropping. On StockPair.com, you locate the Google/Facebook pair, and you wager that Google’s stock will be doing better than Facebook’s by the end of the expiry period. You wait for the option to expire, and when it does, Google is indeed outdoing Facebook, even though both stocks have continued to fall. You win the promised payout on your option. This is a more approachable way to trade stocks for traders who could not otherwise afford to participate in the stock market.
These are the most common types of binary options trades you will find, though you may find other variations. For example, lots of brokers offer One Touch trades, but you may occasionally find one which offers Double One Touch Trades. Some traders will require only one type of trade to be profitable, while others may need a variety. The only way you can discover your trading style and needs is to test different types of trades on your own. Then you can choose a broker which suits your needs and gives you the tools you need to profit with binary options.
Want more information on trading binary options? Use the resources below:
- Where to get 60 second trades? www.fastbinaryoptions.com
- How to test a trade for free? https://www.bestfxbrokers.com/binary-trading/guide/demo-account/
- Compare Binary Options Brokers with an easy to read chart http://www.binaryoptionsblacklist.com/compare-brokers/