To enable you to trade the various types of binary options, you need to understand specific concepts, such as expiration date and price barrier.
All trades have specific expiry dates. Upon expiration of the trade, the movement in price based on the trade type that was selected will determine if that trade is showing a profit or a loss.
As the trader your price targets are the main points you should set to determine the outcome of your trade.
There are three main types of trades in the binary options market.
- In and Out
- High and Low
- Touch and No-Touch
In Out Trade
This type of trade is also known as the boundary or tunnel trade. It is used to trade consolidations and breakouts in price.
The method used to enter this type of trade is for you to first set two specific targeted prices to form a range.
Once you have done that, you will buy an option which allows you to predict if the option price will remain within that price range, or if it will go out of that range, regardless of the direction.
The most common method of trading these types of binary options is to make use of pivot points relating to the asset you intend trading.
Traders who are in the forex market will find it simpler to trade this specific type of binary option with pivot points.
High Low Trade
This type of trade is also called the up down trade. The basis of this type of trade is for you to predict if the asset you are trading will have a market price lower or higher than the target price you selected, before the trade expires.
If you are expecting the price to increase, you should buy a call option. If you are expecting the price to decline, you should buy a put option.
Expiry times vary and could be as low as five minutes.
Touch No-Touch Trade
This type of binary option is based on whether a movement in price will touch the price barrier set or not.
This type of trade is based on the premise that the asset market price will touch the target price you have set at least once prior to the expiration date of the trade.
If this does not happen, you will lose the money you have invested in the trade.
A no-touch trade is the reverse of the touch trade. In this instance you are placing a trade based on the premise that the market price will not touch the target price set prior to the expiration date of the trade.
If you have predicted this correctly, you will show a profit.
This type of trade has variations, such as double touch and double no-touch trades. This allows you to set double price targets and be able to purchase a trade that is based on the market price touching both target prices before the binary options trade expires.
Some brokers will offer you all these different types of trades. However, you should ensure that the same terms apply with your broker before you place a trade.
Image courtesy of arztsamui at FreeDigitalPhotos.net