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More and more option types are now available for your convenience as a binary trader. However, these option varieties can really get confusing even if the basics have been explained in the broker’s website especially if you’re new to trading binary options. Here is a simple explanation of the main types of binary options for you to easily understand and choose which one is ideal to use for certain market conditions:

High/Low

Also known as Call/Put and Up/Down, this is the easiest among the option types. With the High/Low option, you simply need to guess if an underlying asset’s expiry price will be higher or lower than its market price at the moment you opened the trade. If you purchased a High option and the contract expired higher than its opening price or if you purchased a Low option and the contract expired lower than its opening then your option is in-the-money. Otherwise, you lose the trade.

In the example below, the EUR/USD’s market value is 1.35330. If you think that that currency pair will expire higher than this opening price then you need to click on High. Otherwise, you need to select Low.

It is best to use the High/Low option when there is a trending in the market. If a certain asset’s price is trending upward then it is best to purchase a High option since there is a high probability that the option will expire higher than its opening price.

One Touch

The One Touch option has a target price which must be reached or “touched” by the asset before it reaches expiration. It only needs to touch the target price at least once and it doesn’t really matter if the price goes up or down. As long as it touches the bar in the graph even for a second, you win the trade. A No Touch option on the other hand is the opposite which means that it must not touch the target price until it reaches expiration. If you purchased a Touch, you don’t need to wait for the expiry if the target price has already been touched or reached. It is only when you purchased a No Touch that you will need to wait for the expiration to know if your option touched the target price or not.

In the example below, the EUR/USD’s market price is 1.35344 and the target price is 1.35291. If you think that the currency pair’s price will go down and reach the target price then clicking on Touch is ideal. Otherwise, a No Touch is your option.

It is best to use a One Touch if you are sure that a certain level will be reached. A No Touch in contrast, is ideal for soft market conditions or when markets are moving slowly. This is also idyllic to use on a shorter expiries when there is a strong trend upwards while longer expiries are more beneficial if there is a downtrend.

Boundary

Also known as Range, Zone or In/Out, this option type has an upper and lower target price that forms a border hence the name Boundary. If you select an In, the underlying asset’s price needs to stay inside the border until it reaches expiration. If you select an Out, you are predicting that the price of the asset will be outside of the boundary when the contract expires.

In the example below the EUR/USD has a current market price of 1.35348. The upper boundary is set at 1.35400 while the lower boundary is set at 1.35296. If the currency pair trades anywhere between 1.35296 and 1.35400 at the expiry time and you purchased an In then you have a winning trade. If you purchased an Out then the asset’s price needs to be out of the boundary before expiration.

It is ideal to purchase an In option in a Boundary when markets are quiet or when there are no strong trends. Investing on an Out option on the other hand is best when markets are highly volatile or when there is a temporary reversal in the direction of an asset’s price. This is because the market value is unlikely to stay within the boundary.

Short Term

This option type is similar to the High/Low but differ only on the expiry periods. The fundamentals are basically the same which means that you need to select a High price if you think that the asset’s price will be higher than its opening price. Selecting Low means that you are predicting that the asset’s price will end lower than its price when the trade started. A single trade can last from 30 seconds to 5 minutes which is dramatically lower than the standard expiry choices from a High Low option type. This is currently the latest trend in the binary options trading community due to the very short contracts.

The example below shows that the Short Term options basically look the same as the regular High/Low but take note of the only difference which is the expiry. In the picture, the EUR/USD’s market value is currently 1.3522 and the goal is to predict whether the price will be higher or lower than this value after 60 seconds or 1 minute.

Since this option type is extremely short and even technical analysis won’t guarantee a safe bet for very short contracts, only use Short Term when there is a clear trend the market. This is greatly dependent on your mentality and approach as a trader so it is best to assess yourself if you are capable of trading for as short as 30 seconds.
 

 

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