One Touch Binary Options
In the world of binary options, there are a variety of structures which are designed to take advantage of any one particular scenario. This gives the trader a choice of option in order to best reflect his/her view of the market or particular asset. For the beginner, the different options can sometimes be confusing, so it is best to familiarise yourself with the various structures on off in the retail market. For this reason, we have dedicated these pages on our site to cover the various types of options available.
In this section, we will be looking at One-touch options, how they work, and whether they are an instrument worth considering. As stated, the most popular binary options are call and put trades, which allow the trader to profit from a correct prediction on whether the price of an underlying asset will go up or down. This is popular with beginners, as the concept is also simple to understand. Once you have grasped the basics of options trading, you may be tempted to move on to One-touch binary options, so now let us explain the basics on this type of option.
What is a one-touch option?
A One-touch option is a binary option which offers a payout once the price of an underlying asset hits a certain predetermined level. The buyer can set the position of the barrier and the expiry date, and the broker will offer the best payout (in theory) should the barrier be broken (triggered is the correct market terminology). As with all binary options, there are only two possible outcomes, so if the strike level is not triggered, then the option expires worthless and the trader loses the cost of the option price paid. This type of option is used when a trader believes the price of an underlying asset will pass a certain level in a set period of time (the expiry period), but does not believe that gains or losses may not necessarily be sustained. At this point however, it is also worth considering that in this expected scenario, the trader will also benefit from trading the underlying asset and naturally, monitor the position constantly. Indeed, based on the level of payout, with the benefit of technical analysis, placing a stop at a certain point can offer much better risk to reward as the binary option will only pay a set payout. The underlying position however, has unlimited gains, yet the risk is defined by the level of the stop loss – so discipline is required.
One-touch options are naturally less expensive than Double One-touch options, as in the latter case, there are more strikes, and therefore more chance of a strike price being triggered for payout. It is also worth noting, that One-touch options can also be traded at the weekends (in some cases) when global markets are closed. The key reason for the popularity of One-touch options is that they can offer large returns, but this will require the strike price to be placed some way away from the current market. In this case, the buyer is looking for a significant rise in volatility. Once again, this can also be expressed through traditional spot trading.
Having touched on Double One-touch options, let us now explain what they are.
What is a double one-touch option?
A Double One-touch option is a binary option that offers the trader an agreed payout if the underlying asset triggers one or other of two predetermined levels. In this case, a strike price will be placed on either side of current price. The trader will determine the level of both barriers, the expiry date of the contract, and the payout will be set based on these parameters. As stated above, either one of the strike or barriers must be broken before the option expires in order to receive the payout offered (at outset) by the broker. If neither of the price levels are broken the option is rendered worthless, and the trader loses his/her her premium paid for the option.
A Double One-touch option can be a great option to use if you believe the price of an asset will change dramatically over a set period, but you are not sure which direction it will take. A trader stands to benefit whether the price goes up or down, but will require higher volatility to achieve payout. In order to get an attractive payout, the strikes or barriers will have to be placed some way either side of the current market price. If the barriers are set close to the market, the broker will offer a very low payout percentage due to the higher chance of either level being triggered. As such, the better opportunities are likely to remain inside traditional spot trading, where traders can achieve greater returns in relation to risk (taken).
Five steps to start your one-touch options trading
- Find the best on- touch options broker – As with any broker, research is required, but this site will offer plenty of informative and helpful reviews as well as other binary options articles.
- Open a binary options demo trading account – Start by trying out a demo account, as this will give you risk free taste of how binary options work and what they can and cannot offer you.
- Make your first deposit – Once you have some trading practice under your belt you should be ready to trade with real money, though start small and limit your risk(as you should always do).
- Choose an asset – Trading with a small amount of money to begin with, invest in an asset you feel comfortable and familiar with.
- Try different strategies – See what works and what doesn’t work for you, in order to find your winning formula.
Tips on finding the best binary options broker
We will finish by recapping some of the points we have touched on in one of our other pages, by looking at finding the best binary options broker, and what you should look out for.
- Read the reviews – We will feature plenty of reviews here at topratedforexbrokers.com, and there are plenty of other sites online offering similar information.
- Ask for recommendations – word of mouth is still one of the most effective ways of getting the best recommendations in today’s Internet-savvy world.
- Test and try before you sign up for real – we reiterate that binary options trading carries plenty of risk, and taking a risk with a broker you choose is one you can definitely avoid. If you have a few recommendations, try them out with a demo account first, so you can get a good feel for each broker