What are the Different Types of Binary Option Trades?

While the simplistic “up or down” and “all or nothing” nature of binary options trading makes it attractive to traders, especially those who are getting started with trading for the first time and haven’t yet explored spread betting, foreign exchange, or anything similar, the reality of binary trading is that it is not as simple as it might seem.This is not because there are any hidden tricks or secrets when it comes to binary trading, but because binary trading is actually a very general term. There are various different types of binary trading for you to explore, it is not as simple as just saying, “I’m going to be a binary options trader,” and then getting on with it.Before you start binary trading with Bank of Trade and are confronted with a number of different types of trade, take the time to understand what each one entails and how they work. You can then make a decision around which trades to take part in depending on how the risk and potential rewards balance out and inform your binary option strategy.

Up/Down Option Trades

This is the simplest type of trade, and the most common used by beginner binary option traders. All you need to do is decide whether a price will go up or down, and the timeframe in which this will happen – placing a call trade for increases and a put trade for decreases – and then go from there. If your trade finishes in the money – meaning the price went up or down as per your forecast – then you receive a percentage return, which will be detailed before you buy the binary option, on top of your initial investment. If your trade finishes out of the money, then you lose your investment, unless you are with a binary options broker that offers an out of the money refund, which could see you get between 10 – 20% returned, depending on the rate offered.This type of binary option trade is best to use when a market is clearly trending in a particular direction, as choosing whether to place a call or put trade is easy to do against such conditions. Avoid up/down option trades if the market is volatile, particularly over longer periods, when you are a beginner and are new to binary trading.

One Touch & No Touch Trades

One-touch trades are often bought with an expiry date of a week or longer, although you will be able to take part in one touch trading over shorter times should you wish to trade in this way.The difference with a one-touch option against a general up/down trade is that you only require the price of the asset you are trading against to touch a particular target price, hence the name, “one touch option.” For example, if you take out a one-touch option over the space of a week, if the price hits the pre-determined target when you bought the option, you are guaranteed the option will expire in the money irrespective of what happens afterwards. For you, the trade is over at that point, although you usually still need to wait until the overall expiry time before your return is paid out. Even if the price plummets after touching the target, you can still profit.A no touch option works in the opposite direction; if you trade against the price of an asset not hitting a pre-determined level, you are in the money if this price is not hit, in a similar way you would “lay” a bet.One touch and no touch trades are worth having in your binary option strategy if you are unsure about the sustainability of a certain price, or you find an option that you feel offers great reward when balanced against the risk involved. One-touch options are excellent if you believe a particular asset might break out or drop dramatically but not remain at a certain level; no touch is better if an asset has been historically stagnant and there is little to indicate anything will change. The obvious downside of a no touch option is that you will be waiting right until the end of the trade period to see whether you are in the money.

Boundary Trading

Boundary trades are also called range trades. When you are reading binary trading resources, be aware that they are the same thing. Different sites will use one or the other, although sometimes they will use both, even interchangeably. We will call them boundary trades for the sake of this explanation. In boundary trading, you are buying an option for an asset to expire within a particular boundary (or range) hence the name given to them. Instead of buying a call or put option, you buy a boundary trade based on a simple yes or no. Will the asset expire in the boundary at the determined time?Boundary trades are something that you can undertake with potential for success whether you have quiet or more volatile market conditions. While returns can be relatively low from boundary trades, the represent a good investment in a volatile market, as you can trade against the price within the range boundary but also place call or put options on the various levels within each range. For beginners, it is often best to start boundary trading when markets are quiet, but there is a definite opportunity at busier times, too.

60-Second Trading

60-second trading has emerged in 2013 as a popular type of binary option trade, and is favoured by many who are new to the market. 60-second trading is popular because it involves analysis of trends over a shorter time – you only need to know what is likely to happen from one minute to the next rather than over hours, days, and weeks – and it allows traders to make profit quickly and take part in many trades in a short space of time.A 60-second trade is an up/down trade that expires in 60 seconds. It is as simple as that, although there are some extra considerations you need to make before starting 60-second binary trading.The first thing to think about is how often you want to trade. If you want your trades to be fast and exciting, then 60-second trades are excellent, but at the same time you need to have the experience and knowledge of binary trading to identify when a 60-second trade is likely to be profitable.You also need to consider how confident you are trading in such a small window. You might be attracted to 60-second trading because of the potential for higher returns, but you also need to ask yourself whether charts and other things you would ordinarily use add any value. The prices of assets and markets change thousands of times during the trading day; how can you analyse the data at the one-minute level and spot trends?Whether you undertake 60-second trading is obviously a personal choice, but it is recommended for experienced traders. That said, if as a beginner you can spot particular trends, such as sharp increases at the start of day or at particular times, there could be an opportunity to make lucrative returns.The best time to follow a 60-second trading option is definitely when strong trends are seen in the market. If a strong trend inspires an up/down trade, explore the 60-second option for potentially higher returns.

Getting Started

Think about your binary trading strategy and keep these binary options tips in mind when getting started with your Bank of Trade account. Choose the binary options that are best suited to what you want to achieve from trading and that satisfy the level of risk you are willing to take on against your financial situation and the rewards from each trade.

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