No Touch & Range Bound Binaries

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No Touch & Range Bound Binaries

In the earlier chapter, we discussed about the different kind of binary contracts, which can be traded during periods of high volatility. Now, we shall look at binary option contracts which would yield maximum returns during the periods of low volatility.

1. No touch binary options:

For every asset, at any given time, a binary broker would normally offer two no touch binary option contracts. One of them would have a target level above the prevailing price, while the other one would have a target price below the prevailing price. The trader should choose the suitable contract based on the trend forecast.

If a trader believes that the price would go up, then the no touch option contract with target price below the prevailing price should be bought. Similarly, if a trader anticipates a decline in the price of an asset, then the one touch option contract with a target price above the prevailing price should be bought. The trade would result in profit (option contract would end in-the-money), if the price does not violate the target level before expiry.

If the price violates the target level before the expiry time, then the trader would lose his entire investment. The payout can be anywhere between 70% and 90%, depending on the broker and how far the target level is. A no touch options contract should be bought only when a trader expects sharp price moves in a single direction. For example, the Fed, ECB and BoJ interest rate cuts can be successfully capitalized by trading a no touch option contract. A position should be taken against the direction of price movement to profit from the trade.

A no touch option contract benefits traders who are reasonably good at forecasting the direction of the price trend, but not the target price.

2. Double no touch or range bound binary options:

In this contract, instead of a single target price, a broker would offer two target levels, one above and one below the prevailing price. If the price of the underlying asset does not breach both the levels within the expiry time, then the trade would result in a profit.

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If the price violates either of the target levels before expiry, then the trader would lose his investment. A double one touch or range bound binary option contract should be selected only when a trader anticipates a decrease in the implied volatility. The contract is best suited when there are no major news announcements.

No Touch Binary Options

You have decided to enter into the world of binary options trading. You have found a binary options broker to work with, yet you remain a little confused over the different types of options to go for. They may seem complicated but the principles are relatively simple. The hard decision to make is whether these options are a better way to express your view in the market over traditional spot positions. Once you have become accustomed to the terminology and what they represent, you will understand what they are all about. To save you time, we will cover the main points to consider, not only to extend your knowledge on binary options, but also to determine whether they offer better value over trading the underlying assets in the spot market.

Binary options are a type of option that has two possible payouts, a fixed amount of money, or nothing, zero, loss of initial investment (and no more). Binary options trading has become a popular, and particularly so for those with very little experience in the financial markets. This may be due to the common form of option – high/low, up/down – which is essentially a 50/50 bet on whether the price of an asset will go up or down. These common types of option may seem attractive over straightforward Forex, but as some have found out, they can be costly while offering limited rewards, when a buy or sell in the underlying asset would have returned you greater profit. There are, however, other option types of options which try to capture market moves of a different nature. One such are No Touch Options.

What are no touch options?

If you have already read our introduction to One Touch options, you will have understood the idea that these options pay out a fixed amount when a level is reached. A No Touch option is therefore the opposite and pays out a fixed amount if the underlying does not reach (or touch) a pre determined price level agreed at the outset. In essence, when you use this type of instrument, you are simply ‘betting’ that the price of an asset does not reach a certain level before the end of the contract period or expiry. Like a traditional binary option, there are only two possible outcomes – you either win or lose, but either way, the outcomes are fixed from the outset.

When is the best time to use a no touch option?

Many traders will have have their own preferences for using a certain type of binary option – if at all. Aside from payout ratios, and the pure mechanics (ie set risks and reward), traders will choose to use different binary options according to various market conditions. For example, One touch options will be used when a when a trader is convinced that underlying asset price will go up or down, but are not sure whether prices will hold at their expected levels. In this instance, if you are monitoring your trades, depending on the payout ratio offered, you may be better placed to trade straight forward Forex and set a stop loss equal to the amount of the cost of the option. For comparison, a a call/put option will offer even less value if you believe there is a high chance the asset will reverse before expiry. In this case, the trader will lose the cost off the option price he/she has paid. A No touch option is often chosen when the market is expected to consolidate in a narrow range. This can happen after a sharp move, or over a holiday period. As such, the trader is betting that the trading session will be quiet. However, even in quiet times, sudden news can jolt the market, so No Touch strikes will have to be some way off current market to give you a chance to ‘win’. In this case, the payout percentage will be low, so you have to consider this against a range trading strategy in the spot market, which can be more effective and profitable, especially when considering the price of an option.

Let’s give you an example to better explain what happens.

Say you want to purchase a no touch option on the price of coffee. Currently, the price is $30.45 and your chosen binary options broker has offered a no touch option with a strike price of $30.60. If coffee manages to stay below $30.60 for the specified length of time of the contract, the option will expire and the trader will be in the money, meaning they will receive a payout. Alternatively, if the price rises and manages to hit $30.70, the option price is triggered and (is therefore out of the money) and the trader will suffer a loss as he/she receives no payout and loses the cost of the option price paid.

A No touch binary option offers higher return the closer the trigger (or strike) is placed in relation to the current price. If coffee is trading at $35, a trigger price of $35.50 will pay out more than a trigger of $36.00. This purely down to the fact that the chance of hitting a closer target is higher and therefore the payout is more. In turn, this also means that the risk for the option becoming out of the money (or worthless) is greater too. As attractive as some of the payout rewards may seem, in risk terms, they do not offer great value as the market can cover shorter distances and trigger your option ‘out of the money’ very quickly. Some traders have realised this and have decided that spot trades offer better rewards when using disciplined stops.

As well as No touch option, one can also trade a Double No Touch option – also known as DNTs.

What is a double no touch option?

A Double No Touch option (DNT) is a contract which pays out a set amount when a trader has agreed price of an underlying asset does not reach or touch one or other of two predetermined barrier levels either side of the current market. When you choose this type of option, you pay a premium to your chosen binary options broker based on the barrier levels set and length of expiry. If the price remains inside the set limits over the contract period, payout is received. If not, the maximum amount you lose is the cost of the DNT option.

A Double No Touch option is useful if you believe the price of an underlying asset will stay range-bound over a certain period of time. As popular as they have been among traders in the Forex market, they carry the same risks and limitations to rewards to the ones mentioned above. Sudden movement in price can render them worthless, while a good payout ratio will require narrower limits.

What are the advantages of no touch options?

They are by their nature, simple to use and it does what it says. You do not need to be a financial wizard to understand the terminology or how they work.

If you are convinced that there is a period of time that the market will be quiet, and that price will be contained, then this option type can be useful. Even so, it is advised to keep up to date with global financial news. Reading the latest Forex news sites will keep you aware of data and events.

Good analytic skills are naturally a bonus. If you are convinced that certain levels are strong enough to hold, you can express this through No Touch or Double No Touch options.

Barriers or strike levels which are close can offer great payout offers. However, they are high payouts for a reason.

This leads us to the disadvantages.

In order for the payout reward to be attractive, a trader will require trigger levels which are closer to the market. These, of course carry a greater degree of likelihood of being touched. The option is then worthless.

A trader may also choose to have a wider range of barriers which will have to be set of a longer expiry period. Again, the reward may be attractive, but in this instance, the costs may still be high and you may have to commit more of your funds to purchase this.

More funds used will leave you less to be able to trade other moves or developments in the market. Opportunities present themselves every day. This is where straight forward Forex is the better choice as it offers a trader the opportunity to cut or close the trade and change his view.

Spot trading in the traditional markets therefore offers you much more flexibility and does not tie up your trading funds. Plenty therefore to consider when deciding to use binary options.

Touch & No Touch Options

When you start trading binary options, you’ll note you have access to several types of instruments. The most common and simplest among them are call and put trades. These are predictions that the price of a trade’s underlying asset will move up or down (respectively). Beginning traders typically start with call/put trades because they’re easy to understand. After they gain some experience, many venture into one touch binary trading.

The above example is from 24Option. The white jagged moving line is the current price point. The light gray section at the top of the chart is the ‘touch’ line. If you were to select ‘touch’ and enter a trade amount and click ‘buy’, all that you have to do is have the price move up and hit that point.

Sometimes called touch or no touch binary options, these trades are slightly more complicated than calls and puts. More than merely predicting the direction an asset’s price will move, you must also predict whether that price will reach a specified target (or strike) price. This will become clearer below as we explain, in detail, how one touch binary options work.

How Touch And No Touch Binary Options Work

As noted, with one touch trading, you are predicting whether an asset’s price will reach a certain level before the trade expires. This level can be above the starting price or below it. Your trade becomes immediately profitable if the target price is reached. The trade is closed and the payout – you’ll know the potential return and corresponding payout ahead of time – is deposited into your account.

We’ll use a simple example to illustrate how this works.

Suppose the underlying asset is gold. The spot price – the price of an ounce at the time you execute the trade – is $1,605 and the strike price is set at $1,620. (Some binary options brokers will let you set the strike price.) Further suppose the trade requires $100 in capital, and pays out $170 if the strike is reached.

Here, your trade is profitable if the price of an ounce of gold reaches $1,620 at any time before the trade expires. Once it hits that price, it no longer matters if the price plummets. It has “touched” the target level, and $170 is added to your account. If the price of gold doesn’t reach $1,620, you’ll lose your investment.

24Option.com “No Touch” Example – You Win If Price Does Not Touch Top Of Light Gray Area

No touch binary trading works in the opposite fashion. You are predicting that the asset’s price will not reach a particular level. As with one touch binary options, the target level can be set above or below the asset’s spot price. (In most cases, you set the level.) Here, if the asset’s price reaches the target before expiry, the trade is immediately unprofitable. You will lose your investment.

To demonstrate, let’s continue with our gold example…

Suppose the spot price is $1,605 and you have set an upper limit of $1,620. With no touch binary trading, this means your trade will be profitable as long as the price of gold remains below $1,620 until expiry. If at any time while the option is active the price of gold hits the target, the trade is closed out of the money.

You can also set a lower limit. For example, you can predict that the price of gold will not fall below $1,590 before the trade expires. This works in the same way as the trade described above, but as a mirror image to it.

Returns And Profit Potential On Touch Binary Trading

When you start to trade one touch binary options, you’ll notice the potential returns grow larger the further away the strike price moves from the spot price. For example, a one touch binary for gold with the spot price at $1,605 and the target price at $1,620 may offer a 70% return. The same trade with the target price set at $1,630 might deliver an 85% return.

Conversely, with no touch binary trading, the further away the target level moves from the spot price, the smaller the return. A no touch trade with gold’s spot price at $1,605 and the target level at $1,620 may return 65% on your investment. If you move the target level out to $1,630, the potential return might fall to 60%.

Basically, the greater the risk of losing your capital, the larger the potential return and profit you stand to gain. Exceptions aside, this is the general rule with all investment vehicles. Thus, when you see a binary options broker offering a high-yield touch option, realize that the risk accompanying the trade is higher.

This page will also cover the potential returns you can expect to see when you trade touch and no touch binaries. And of course,

Getting Started With One Touch Binary Betting

We’ll start by pointing you to several trusted brokers that offer one touch trades. However, 24Option is traditionally the best broker offering these types of trades on a regular basis.

If you already have experience with trading binary options, you’ll likely be comfortable with touch and no touch binary trades. In some ways, these instruments are little more than an extension of simple call/put trades. You’re still predicting the direction in which an asset’s price will move, but are also forecasting the extent of that movement.

If, on the other hand, you are new to binary options, start with calls and puts. They’re simple and elegant from a pure trading perspective. They can be executed and closed quickly – some in 5 minutes – which smooths your learning curve. Along the way, you can take the time to focus on a few preferred assets. Learn about the factors that influence their prices.

Once you have a fair grasp of simple binary options, move into touch and no touch trading. By the time you do so, you’ll be able to make better predictions about the price movements of your chosen assets. That is how successful – i.e. profitable – binary options trades are executed.

4 Reputable Sites To Trade One Touch Binary Options

Although one touch trading is technically considered to be an exotic form of binary options trading, most brokers offer it. The key is to identify three or four brokers you can trust. We recommend registering accounts with a few brokers so you can compare them side by side and ensure you are receiving the best possible returns for each trade. Below, we’ll profile four binary options brokers we’ve found to have great reputations, competitive returns, and a good variety of assets and instrument types.

MarketsWorld – If 24Option is one of the best-regarded brokers in the industry, Markets World is one of the favorites among veteran binary options traders, especially those in the US who have very few brokers to choose from. They maintain an office in New York, are known for their responsive support, and host trades covering a huge list of assets in the four major categories (stocks, currency pairs, commodities, and indices). They also offer free access to a live demo account. Visit Markets World and create an account to start trading one touch options today.

24Option – Arguably one of the best-regarded brokers in the binary options business, 24Option is our top choice for one touch binary trading. They use a top-notch trading platform (OptionFair), offer competitive returns (65% to 350%, depending on the instrument), and maintain a relatively low minimum trade amount ($24). They also provide access to numerous binary option types, including high-low trades, range options, and 60 second binary options. Register an account at 24Option.com today to get started.

IQ Option – We like IQ Option for several reasons. They require a low minimum deposit ($10), which allows new traders to get started easily. They also maintain an impressive list of assets to trade, including 9 commodities, several stocks, and more than a dozen currency pairs. IQ Option uses their own proprietary trading platform, which comes with a feature called Option Builder. This feature allows you to customize your trades, giving you a lot of flexibility to match your trading activity. Visit IQ Option for more details.

Binary Mate – One of the first things you’ll notice at popular US facing broker BinaryMate.com is that the potential returns on their trades are slightly lower than those found elsewhere. The reason is worth considering. This broker provides a 15% rebate on trades that expire out of the money. If you incorporate this feature into your trading activity, it is possible to make more in overall profits than you might elsewhere. Another reason we recommend Binary Mate is because of their asset list. It is one of the largest we’ve found. Visit them today to register your account.

Those who seem to generate the best results with one touch binary trading are traders who have a strong understanding of their chosen assets. If you’re just getting started, here’s what we recommend:

Step 1: Visit the four brokers above.
Step 2: Register an account at each.
Step 3: Get some experience with call and put binary options.
Step 4: Move into touch and no touch trading to expand your profits.

Best Binary Options Brokers 2020:
  • BINARIUM
    BINARIUM

    Best Binary Options Broker 2020!
    Ideal for beginners!
    Free Demo Account + Free Trading Education!
    Get a Sign-up Bonus:

  • BINOMO
    BINOMO

    2nd place in the ranking!

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