THE HOT WINDOW
One-touch Binary Options Strategy
One-touch binary options are a type of option where the price of the asset must touch a set strike point at least once before the expiry time to be considered in-the-money. Regardless if the asset closes higher or lower than its opening price, as long as the asset touched the strike point, the trader wins. In this lesson, we will briefly cover one-touch options, and the best scenarios for trading them. We will also cover strategies we've used in different scenarios that when trading one-touch options proved to be successful.
Distance between the Entry Point and the Strike Point
One-touch options offer extremely large percentage payouts towering well above percentage payouts of other option types. One-touch options offer payouts well in excess of 300% with some offering payouts of 500% or higher. Brokers are very smart, and offer these level payouts for a good reason. A fundamental truism of binary options trading, is that the higher the payout the riskier the trade.
If an assets price fluctuation indicates that a one-touch trade would be a good trading option for it, make sure the strike point offered in the option is in reasonable reach. If it''s not, you will surely finish out-of-the-money.
If your broker is offering a one-touch option with a high level of payout, and the price movement of the asset indicates that the price has the ability to hit a strike point whether above or below the current price, you can increase your profit margin on the trade by additionally trading a call or put option on the same one-touch option.
Example: A one-touch option is currently offering a 300% payout if the trade is in-the-money. You see the opportunity to gain by buying the one-touch option, and during the period of your trade, news announcements cause you to believe the price will not only touch the strike point, but that additional gains can be made from the price fluctuation. The key to this strategy that determines its success is an economic announcement that will shoot the price either up or down. When you see news announced that will cause the market to react either with massive buying or massive selling, execute both a call and put on the same asset. You will be in-the-money on one of the two trades, but you will also be out-of-the-money on one of the two trades. Even with a 100% loss from your out-of-the-money trade, the payouts on your in-the-money trades will be far greater. Depending on the percentage levels, your in-the-money trades can make for a very successful trading day.
Make sure the touch points are truly in reach. Always remember that the higher payouts for touch options always have a greater risk factor. This strategy is only recommended when strike points are in reach, and price activity is high.
A trend means that assets trade generally higher or lower over a period of time which can either be in short term periods or long term periods. Trends, however, can prove to be irrelevant when trading options with expiry times that are five minute or less. Price in a fifteen minute period tends to have much more volatility than in a 1-hour period. Look at longer term analysis to determine if the asset is either trending upwards or downwards. Look for opportunities where a touch option will allow you to capitalize on the trend.
Tension from short-term expiries can sometimes be overwhelming. You also have the option of investing for the long term. The usual long-term periods for binary options are one month. One-touch options for long-term periods have strike points that are much higher than the starting price point, and need to be taken into consideration before trading. Remember that it is only necessary for the price to touch the strike point once before the expiry time ends. Thorough analysis is the only way to determine if a one-touch option in a long-term period will be a good investment.
Keep in mind that brokers have outstanding forecasters that set the strike points for one-touch options. Study option numbers well, and try to see things through the perspective of the forecaster. Many times a strike point can give you a clue on the direction the market might be heading in. Forecasters have also proven to be fallible, especially in the case of long-term investments. It just proves that there are no silver bullets for market predictions, and you should also use your judgments in conjunction with theirs.
When volatility is high in an assets price movement, a high or low trade is not a good investment. Volatility, on the other hand, makes one-touch trading a better choice. The activity can give the price the push it needs to touch a strike point whether high or low. Brokers are also aware of market volatility, and might set the strike points out of the assets reach. Knowing your assets can help you decide if the one-touch option is a good investment.
Every type of binary option has its advantages. In the case of one-touch options, the price only has to hit the strike point once to be in-the-money. Even if the price closes far from the strike point, but during the trade period touched the strike point price, it's still considered in-the-money. The buying and selling activity during the day can really let you know how effective a one-touch trade will be.
Becoming an expert at reading and analyzing price charts, and historical data can really help you squeeze every opportunity possible out of binary options trading. It should always be your starting point, and day-by-day, you should work on bettering your skills in performing research and analysis. Combine the two with our strategies and bright trading days are ahead.