The Touch/no Touch binary trade sort is one of the binary trades contracts famously traded in the trade options market.
In this type of trade option contract the traders makes a choice between the price of the asset reaching a price barrier (Touch) or the price of the asset not reaching the price barrier (No Touch) before the expiry of a trade contract.
To trade Touch/No Touch Binary options contract some binary trading parameters have to be taken by Binary trader into their consideration importantly in order to have successful trade outcome.
- Identifying asset direction
- Deciphering the range of movement
- Setting an appropriate expiry time
The price of the asset being considered for trade can go up, go down, or remain locked in a sideways consolidating movement. Even in the context of a consolidating movement, price action still moves up or down confined within the range of the consolidation. Knowing which of these price movements that the asset will most likely display within the period in view is the first critical step which the trader must address.
There are several ways to determine price direction but for the purpose of binary trading, it is best to stick with technical analysis. During news releases, the price movements are rapid and can be predicted, so most brokers will make their commonly traded assets unavailable for trading. However with technical analysis, it is a lot easier to pick out trading opportunities well before the rest of the market is aware of them.
Determining the Range of Price Action
Trading the Touch/No Touch contract is not just about direction, but it is also about being able to set a price target which the asset can achieve in the chosen direction. It is not enough to simply know that the EUR/USD for example, will go upwards or downwards on a particular trading day. It is equally important in the context of the Touch/No Touch trade to know that the EUR/USD will get to a particular price level before slowing its advance or retreat. The strike price for the trade will have to be found within this price range, or if you are using a trading platform where the strike price is fixed, you have to try to conduct some analysis to discover if the strike price set by the broker will be contained within the price range that your analysis has shown that the asset will attain.
Of course, these scenarios are for the Touch component of the trade. The No Touch component will entail the exact opposite. It is either the trader chooses a direction opposite that of the price action, or the price target is set beyond the limits of the range of movement.
Expiry Time in Binary Options
The expiry time is the last bit of the puzzle which must be solved for a successful trade. Anything else the asset must do to put your trade in the money must happen within the time limit. If this is not the case, then all the efforts put in would have been useless. However, there is a key that can be used to set the expiry with success. For the Touch outcome, giving the trade more time favors a positive outcome. For the No Touch trade, giving the trade less time favors trade outcome.
When a Touch trade is given more time, it allows the asset the opportunity to try to achieve the strike price, provided the direction of price movement was attained. Once the strike price is achieved, the trade will automatically be closed out as a winner. For the No Touch trade option, the trader should as much as possible set the price target away from the direction of price action. By shortening the expiry, the trade will then have little time to negate the trader’s expectations and this favors an outcome that will put money in the trader’s account.
There are several time tested ways of determining asset direction and range of movements of an asset. The various methods of technical analysis which will include the various trading strategies, candlestick strategies and chart pattern techniques, are all suitable. It is left for the trader to make a determination of which of the strategies will work best for the Touch/No Touch contract on the trading platform.