How to Set Up a Trade! The ability to trade the different binary options can be achieved by understanding certain concepts such as strike price or price barrier and expiration date. All trades have dates at which they expire.
When the trade expires, the price action behavior according to the selected type will determine if it’s in profit (in the money) or in a loss position (out of the money). In addition, the price targets are key levels that the trader sets as benchmarks to determine outcomes. We will see the application of price targets when we explain the different types.
There are three types of trades. Each of these has different variations. These are:
- Touch/No Touch
Let us take them one after the other.
How to Set Up a Trade
Also called the Up/Down binary options trade, the essence is to predict if the asset’s market price will end up higher or lower than the strike price (the selected target price) before the expiration. If the trader expects the price to go up (the “Up” or “High” trade), he purchases a call option. If he expects the price to head downwards (“Low” or “Down”), he buys a put option. Expiry times can be as low as 5 minutes.
Please note: some brokers classify Up/Down as different types, where a trader purchases a call option if he expects the price to rise beyond the current price or purchases a put option if he expects the price to fall below current prices. Some trading platforms may see this as a Rise/Fall type. How to Set Up a Trade
The In/Out type, also called the “tunnel trade” or the “boundary trade,” is used for trading price consolidations (“in”) and breakouts (“out”). How does it work? First, the trader sets two price targets to form a price range. He then purchases an option to predict if the price will stay within the price range/tunnel until expiration (In) or if the price will break out of the price range in either direction (Out).
The best way to use the tunnel binaries is to use the pivot points of the asset. If you are familiar with pivot points in forex, then you should be able to trade this type.
How to Set Up a Trade
This type is predicated on the price action touching a price barrier or not. A “Touch” option is a type where the trader purchases a contract that will deliver profit if the market price of the asset purchased touches the set target price at least once before expiry. If the price action does not touch the price target (the strike price) before expiry, the trade will end up as a loss.
A “No Touch” is the exact opposite of the Touch. Here you are betting on the price action of the underlying asset not touching the strike price before the expiration. How to Set Up a Trade
There are variations of this type where we have the Double Touch and Double No Touch. Here the trader can set two price targets and purchase a contract that bets on the price touching both targets before expiration (Double Touch) or not touching both targets before expiration (Double No Touch). Normally you would only employ the Double Touch trade when there is intense market volatility, and prices are expected to take out several price levels. How to Set Up a Trade
Some binary options brokers offer all three types, while others offer two, and some offer only one variety. In addition, some brokers also put restrictions on how expiration dates are set. Therefore, in getting the best of the different types, traders are advised to shop around for brokers who will give them maximum flexibility in terms of types and expiration times that can be set.
Trading via your mobile has been made very easy as all major brokers provide fully developed mobile trading apps. Most trading platforms have been designed with mobile device users in mind. So the mobile version will be very similar to the full web version, if not the same. How to Set Up a Trade
Brokers will cater to iOS and Android devices and produce versions for each. Downloads are quick, and traders can sign up via the mobile site. Our reviews contain more detail about each broker’s mobile app, but most know this is a growing trading area. Traders want to react immediately to news events and market updates, so brokers provide the tools for clients to trade wherever they are.
This is so important to know!
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