In our previous article we reviewed the most popular option type – Digital binary options, as well as Range options. We continue with our trading guide by looking at Touch options and their variations and custom-built binaries with the expiry time and the level of risk.
Here we have predefined levels that have to be reached before the option expires. The direction of the price itself is the primary object to have in mind, but the strength and potential for movement is also vital. The usual options of this variety last an hour, but occasionally some brokers offer longer durations.
In terms of the best time to trade touch options, the usual deduction process leads us to believe that volatile times are preferable. This is true on many occasions, but there is a better approach to this option type.
As the algorithms of brokers adjust to different conditions and the distance to the winning level changes according to the volatility of the moment, the more viable approach is to wait for times when volatility is imminent.
These can be at times preceding economic announcements or when unexpected news comes out (irrespective of where it pushes the respective price level). Of course this would mean closely following the respective instrument and news sources, but it’s still the best approach for touch options over the long-term.
ACY Securities’ Sponsorship of Australian Turf Club off to a Flying StartGo to article >>
There are several varieties of this option type, namely One Touch (usually combined with No Touch) and Double Touch. The first is the reverse of the main type – the price level must either reach a level that is only in one direction – either above or below the current one. The No Touch option is its opposite – a level either above or below the current one, must not be reached before the expiry time, making them suitable for calmer periods that either are during hours when trading volume is low, or in the lull after some big movements.
Double Touch is exactly what it says on the label – the price has to reach the set level twice before the expiry, to payout a profit.
Custom Binary Options
These options have variables that can be set by the trader. The instrument, expiry time and payout are all adjustable, giving the greatest possible flexibility to binary traders.
The main advantage here is that you make them cover the time period you prefer – not the one preset by the time limitations of the usual options. With this, traders can cover periods when they expect a certain movement to occur – it can be around a news event, ideally one which hasn’t attracted too much attention and the payout can be higher.
The options can be found under names such as “Option Builder”, “Expert Trading” or something similar, but not all brokers offer them.