For successful (and long term) binary options trading, a trader will seek out a strategy which is ideally easy to understand and delivers reliable returns. The strategy should be simple to implement and easily customized for various markets and trading conditions.
Touch or No Touch?
Traditional binary options trading involves a Yes/No or True/False trade option (ie: will price be > strike price at expiry?). No Touch (and touch) strategies are basic to understand and easy to incorporate into a profitable trading system by assigning a price goal to the trade. That is, the trader forecasts that an assets value will or will not reach a certain level at expiry.
If a ‘touch’ strategy is chosen, price must meet or exceed the traded price target during the trading period (even if for just a spilt second). That is, if price is reached (or breached) at or before expiry, the trade will expire in-the-money. Alternatively, a ‘no touch’ strategy implies that the price target will not be reached, and if this proves to be true during the trading period, the trade will again expire in-the-money.
Because the level of risk is directly proportional to a traders potential gains, a No Touch strategy is considered to be a higher risk trade (than a ‘touch’ alternative). This is because a trader is rather forecasting that the asset’s value will not reach a certain price level, which counters a traders normal trade position.
A ‘no touch’ expiry can be as short as 5 minutes to as long as 30 days. Typically, the longer the expiry period, the greater the returns if the position expires in-the-money.
Because markets and prices are volatile in nature, a No Touch strategy trader must be able to predict with a level of certainty that the strike price will not be touched, even for the shortest of periods. To do this, a trader should consider the asset’s price history and identify the overall market trend as well as anticipating the price reaction to both scheduled financial and/or economic events.
No Touch Set-Up
Irrespective of the timeframe, a trader must effectively setup the price chart for profitable No Touch trading. Before executing a No Touch trade, it is important to have a solid understanding and identify the kind of trend and pattern the asset is currently trading in.
To do this in the first instance, a trader should identify the high/low range for the period. The high price point and the low price point helps establish a price boundary, which is also referred to as the range. These boundary lines are also effective in identifying support and resistance levels.
In a trending market (either upward or downward), the two parallel lines represent the support and resistance lines of a trend and form either an ascending or descending price channel. An ascending price channel would mean price is on an uptrend. A descending price channel suggests a price downtrend while a horizontal price channel would indicates that the asset’s price is ranging. Price points outside the channel are targets for a No Touch strategy.
For a high probability trade, a No Touch trade should be places below the lower support line in the case of an ascending price channel. For a descending price channel, a No Touch trade should target the region above the resistance line. NOTE: Any price action that is set between the price channels is a high probability target price for a Touch trade option.
A trader may also use ascending and descending triangles and pin bar patterns as well as rounding tops and bottoms to determine No Touch trading opportunities.
Responsible money management ensures that the losses don’t mitigate the profits.