A Higher or Lower Price? Choose a High/Low Option
This type of binary trade is one in which the trader purchases a call option because he believes the price of the underlying asset will end up above the strike price. Alternatively he could also purchase a put option if he believes the asset’s price will end up below the strike price, when it expires.
What to do if you want to trade a high/low option
If you decide you want to try your hand at high/low option trading you will need to follow the following steps:
- Decide on the asset you want to trade
- Decide on the strike price, because that will be used as the benchmark for the trade
- Choose a direction – Calling if you believe the price will end up above the strike price, and a put if it you think it will end below the strike price
- Decide when the option will expire
- Click on the button and the option has been put in place
This seems pretty simple, you have to agree, but it is not quite so easy to ensure your trade ends up with a profit. Some brokers increase the difficulty, by only allowing a minimum expiry of 7 days. Obviously it is more difficult to ascertain what will happen to the price over this length of time.
How you can be successful with high/low options
Some experts will say that you need to keep in touch with the latest news to be successful at high/low options trading. However, we don’t consider this to be all that practical. This is only a good strategy if the broker platform you’re using allows expiration dates of between 3 hours and 3 days. The effect of news on prices is only at its strongest during this period of time. If you use news events outside this time period, you will find it unreliable.
So can strategies be used with high/low options? Technical analysis is certainly an option, as it is a strategy that is determinant on price action. Chart patterns can be an excellent tool. You will need to pay attention to any bullish reversal candlesticks, or bullish patterns. There are a number of the best binary options brokers who offer the download of trading platforms that include Forex, crude oil, spot metals, and index futures. Preferably they should be offered on the same platform and perform analysis by way of charts. This will all add to the likelihood of trades being more successful.
As in any form of gambling, and let’s not kid ourselves that binary options trading is a form of gambling, there are traders who are quite happy to gamble on high/low options. And much like any other financial market there is no real room for hunches. Yes they can sometimes work, but you will be far more successful in the long term with a good strategy. One that helps you see where an asset is heading, and make it easier to determine whether the asset will end up as a high or on a low.
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The benefits of trading high/low options
There are a number of benefits to trading high/low options, when compared to trading regular Forex or stock markets The main advantage of there is no need for either a stop loss or a take profit target. All a trader needs to focus on, once profit and loss has been determined, is the expiry date of the option. As soon as a trade is active it cannot be changed or adjusted. Which means traders aren’t tempted to change their strategy or extend losses.
High/low options are easily applied to all market conditions. The can be traded in markets that are trending or moving sideways. This is because there is no need for the price to e trending strongly in one direction. All that is required is for the price to be a fraction higher or lower in order to provide returns of up to 85%. High/low options can also be traded when there is strong trending or volatility. There is a higher level of risk, but this is balanced out by higher payouts. If you happen to think a market will move strongly in one direction this can be a very profitable option type to use.
Trading binary options in general, has become a very popular form of investment for a number of different types of trader. The fact that they are so simple has made them very popular for beginners, and been responsible for attracting many new investors. But as with any form of investment, the risk of losing your money is ever present.