One Touch Binary Options Trading Explained in Details

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  • Binomo
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What Are Binary Options Trading? – Binary Options Explained With Example

Binary Options trading are known for their simplicity and all-or-nothing nature. Moreover, a few reasons are behind to give this trading type name binary option. Options are derivative instruments. It can be traded as forex pairs, cryptos, stocks, indices, commodities, etc.

Furthermore, for traders, it is a lucrative trading type because of it’s quick and high return percentage. But, according to the research, binary traders should pay close attention to the rules of trading before diving with real money.

So, consider this article as a guideline for beginners and hence, we will keep it as simple as possible. Let us start with the binary definition first.

What Is Binary Options Trading?

Abe Cofnas is a thought leader and analyst in the financial industry. We took a line from his book to explain the actual meaning of binary.

“The binary option is called binary because it fits the condition of being either right or wrong-all or nothing.”

On the other hand, the exotic option allows a trader to speculate on the price movements of various instruments. To trade binary option, you don’t need to purchase an underlying asset.

You rather predict whether the price will increase above, or decrease below the strike price or purchase rate. The strike price is the price, at which traders trade underlying assets. Market price must increase or decrease, by the time the trade expires.

The expiry period for binary options is very diverse. The time frame starts from 30 seconds and lasts up to a year. After prediction the price, you will select the call or put option, depending on the asset price movement.

If you guess accurately, you win a payout. But the wrong prediction will give you nothing. It is required to mention that the payout rate differs from asset to asset and broker to broker.

Speaking of assets, there are multiple trading instruments that you can trade as binary options. Before selecting any pair, find some strategies and rules on how to trade binary options .

We will explain all the terms and facts of the binary option below that will give you more knowledge to understand.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Broker 2020!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Get Your Sign-up Bonus Now!

  • Binomo
    Binomo

    Good Broker For Experienced Traders!

One Touch Binary Options

In the world of binary options, there are a variety of structures which are designed to take advantage of any one particular scenario. This gives the trader a choice of option in order to best reflect his/her view of the market or particular asset. For the beginner, the different options can sometimes be confusing, so it is best to familiarise yourself with the various structures on off in the retail market. For this reason, we have dedicated these pages on our site to cover the various types of options available.
In this section, we will be looking at One-touch options, how they work, and whether they are an instrument worth considering. As stated, the most popular binary options are call and put trades, which allow the trader to profit from a correct prediction on whether the price of an underlying asset will go up or down. This is popular with beginners, as the concept is also simple to understand. Once you have grasped the basics of options trading, you may be tempted to move on to One-touch binary options, so now let us explain the basics on this type of option.

What is a one-touch option?

A One-touch option is a binary option which offers a payout once the price of an underlying asset hits a certain predetermined level. The buyer can set the position of the barrier and the expiry date, and the broker will offer the best payout (in theory) should the barrier be broken (triggered is the correct market terminology). As with all binary options, there are only two possible outcomes, so if the strike level is not triggered, then the option expires worthless and the trader loses the cost of the option price paid. This type of option is used when a trader believes the price of an underlying asset will pass a certain level in a set period of time (the expiry period), but does not believe that gains or losses may not necessarily be sustained. At this point however, it is also worth considering that in this expected scenario, the trader will also benefit from trading the underlying asset and naturally, monitor the position constantly. Indeed, based on the level of payout, with the benefit of technical analysis, placing a stop at a certain point can offer much better risk to reward as the binary option will only pay a set payout. The underlying position however, has unlimited gains, yet the risk is defined by the level of the stop loss – so discipline is required.

One-touch options are naturally less expensive than Double One-touch options, as in the latter case, there are more strikes, and therefore more chance of a strike price being triggered for payout. It is also worth noting, that One-touch options can also be traded at the weekends (in some cases) when global markets are closed. The key reason for the popularity of One-touch options is that they can offer large returns, but this will require the strike price to be placed some way away from the current market. In this case, the buyer is looking for a significant rise in volatility. Once again, this can also be expressed through traditional spot trading.

Having touched on Double One-touch options, let us now explain what they are.

What is a double one-touch option?

A Double One-touch option is a binary option that offers the trader an agreed payout if the underlying asset triggers one or other of two predetermined levels. In this case, a strike price will be placed on either side of current price. The trader will determine the level of both barriers, the expiry date of the contract, and the payout will be set based on these parameters. As stated above, either one of the strike or barriers must be broken before the option expires in order to receive the payout offered (at outset) by the broker. If neither of the price levels are broken the option is rendered worthless, and the trader loses his/her her premium paid for the option.

A Double One-touch option can be a great option to use if you believe the price of an asset will change dramatically over a set period, but you are not sure which direction it will take. A trader stands to benefit whether the price goes up or down, but will require higher volatility to achieve payout. In order to get an attractive payout, the strikes or barriers will have to be placed some way either side of the current market price. If the barriers are set close to the market, the broker will offer a very low payout percentage due to the higher chance of either level being triggered. As such, the better opportunities are likely to remain inside traditional spot trading, where traders can achieve greater returns in relation to risk (taken).

Five steps to start your one-touch options trading

  • Find the best on- touch options broker – As with any broker, research is required, but this site will offer plenty of informative and helpful reviews as well as other binary options articles.
  • Open a binary options demo trading account – Start by trying out a demo account, as this will give you risk free taste of how binary options work and what they can and cannot offer you.
  • Make your first deposit – Once you have some trading practice under your belt you should be ready to trade with real money, though start small and limit your risk(as you should always do).
  • Choose an asset – Trading with a small amount of money to begin with, invest in an asset you feel comfortable and familiar with.
  • Try different strategies – See what works and what doesn’t work for you, in order to find your winning formula.

Tips on finding the best binary options broker

We will finish by recapping some of the points we have touched on in one of our other pages, by looking at finding the best binary options broker, and what you should look out for.

7 Binary Options

Binary options trading is becoming increasingly popular all over the world and there is a lot of hype happening around it. It also leads to many people being so excited about trading that they don’t actually ask: what is binary options trading exactly?

If you are one of those traders that want to understand what it is and how it works, we are here to guide through the basics of binary options trading.

What is binary options trading?

Binary options, which is also known as digital options or fixed-return options among traders, is a special class of options. In it, the payoff is either a fixed predetermined amount or is zero.

With the standard high-low binary option, a trader would buy would a binary call option is they think that the price of underlying asset is going to go up. Consequently, they would buy binary put option is they think the price will go down. From here, the situation can have two possible outcomes: either a trader was right in his assumptions and receives a payoff or he was wrong and he loses his initial investment.

Since binary options have only fixed returns, it doesn’t really matter by how much the price of underlying asset has increased or dropped. The mere fact of increase/decrease is what’s important. The payout is fixed and is known before entering a trade. Normally it is around 70% or 80% of the amount invested.

One more thing that is important to mentions when talking about binary options trading basics is expiry time of a trade. It is customizable and ranges anywhere between 60 seconds and a few weeks. So a trader can decide himself when he finds out the outcome of each particular trade.

A Typical Binary Option Trade

So what does a typical binary options trade look like? Let’s take a look at the following chart.

As you can see, this binary options broker offers 85% payout for the EUR/USD trade and the binary call option in it is currently valued at $1.30.

So let’s imagine that a traders is tracking the price movements of it for a few hours and comes to a conclusion that the price will go up during the next 5 minutes. In fact, he is so sure of it that he decides to invest $100 in this trade. So he purchases a binary call options EUR/USD with the expiry time of 5 minutes.

And he is right! The price goes up with a small difference and is now $1.31. But the fact that it went up by only $0.01 is not what’s important. What matters is that it did and the trader receives 85% payout which in his case is $85.

If we imagine that he was wrong and the price would actually go down instead, he would lose his initial investment.

The important lesson here that it wouldn’t matter for a trader if the price went up drastically (let’s say to $2.4) or went down by much (to $1.00). He only cares about the mere fact of the price change as it will determine the outcome of this particular binary options trade for him. And this is what binary options trading is about.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Broker 2020!
    Perfect For Beginners!
    Free Trading Education!
    Free Demo Account!
    Get Your Sign-up Bonus Now!

  • Binomo
    Binomo

    Good Broker For Experienced Traders!

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