One type of binary options trade that is very common is called “One Touch.” Your broker may or may not offer these trades, but many do. They are probably the second most popular type of trade after High/Low. How does it work? With High/Low, you are betting on the direction of price movement, but price does not have to move a particular amount for you to win. It could move a little or a lot, and you would still pull a profit if you picked the right direction. With One Touch trading, you need to be able to predict both the direction of price movement and how far price is going to travel. When you see a One Touch trade, you will notice a goal price listed alongside the expiry time. This is the price that the asset must reach within the expiry period.
One Touch Trading Advantages
Why take these types of trades if they are harder to win than High/Low trades? When you take a look at the payout values your broker lists, you will understand. The average payout for a winning High/Low trade may be something like 75%, and rarely exceeds 85%. But the payout for a One Touch trade? You may see numbers like 300%, or even 500% or higher. That means if you invested $10 in a One Touch trade and won, the payout could be $50. If you had $100 to invest in a One Touch trade, you could win $500! And if you lose, all you lose is your investment. And who doesn’t want a chance to win more money?
There is a reason the payouts are higher, though. The broker knows they can afford to offer higher payouts, because traders are less likely to win these types of trades for a couple of reasons. First off, no matter how good or bad a trader is at predicting the direction of price movement, there are only two possible directions price can move in a High/Low trade: up or down. That gives a binary options trader fairly good odds of getting lucky, even if they have no method in place. One Touch trades also specify a value price must reach, and that adds a lot more risk for the casual trader, and makes it far less likely they will win by happenstance.
The other reason that payouts may be high is because brokers often set a goal price for the trading asset which they believe the asset is unlikely to reach within the expiry time. Odds are your broker has a lot more time and resources invested into trading than you do, unless you are a full-time professional. But that means serious traders who wager on One Touch options are often mistaken in their strategies, or they simply cannot find a good trade to wager on, since they realize that the market is unlikely to give them the movement they seek.
Despite this, there are still situations where you can win at One Touch options if you are diligent and pay attention. You should understand how important strategy is now for these types of options. You absolutely need to have a plan in place, or you are likely to lose again and again. With a plan, though, you have a shot at those tremendous payouts.
Identifying Market Movement
The best time to trade One Touch options is always when the market is moving strongly in a particular direction. Take note of the goal price and the expiry time, and open up your trading charts. If you do not have charting software yet, get it for free here. Your goal is to determine whether the market is trending or entering into a trend that will produce enough movement to get you to the goal price on time. To analyze what you see in front of you, you will need a trading method.
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One Touch Trading Systems
What types of trading systems are appropriate for One Touch trading? You can use any strategies which have been developed to predict price movement. So look for trading methods that were designed to help traders identify the start of trends. You will find many free trading strategies on websites for Forex, stock, and futures traders that can get you started. Keeping it simple is smart so that you understand what your system is telling you. Here are a few types of strategies to look into to give you some ideas:
Moving Average Crossover
One of the simplest trading systems which can be used to identify the start of a trend is one which utilizes a couple of moving averages, a faster one and a slower one. Some traders may use several. When the faster moving average crosses the slower one, that may be indicative of a new trend. You can combine this method with others to produce confluence and get a stronger impression of what is going on.
MACD stands for Moving Average Convergence Divergence. This is an oscillator you set up underneath your chart, and which you can use by itself or with other methods to spot a possible trend formation at a reversal point.
You can also look for patterns in price (or price action) which signal the emergence of a new trend. There are specific patterns you can spot at swing-highs and swing-lows which tend to form when there is going to be a reversal in price.
Consider Support and Resistance
There are hundreds of different binary options strategies out there, some which stand alone, and others which can be combined with different methods for even greater success. Most rely on some combination of indicators and price patterns. You also may find fundamental trading methods which are ideal if you are an economist. Pay close attention to where support and resistance are likely to form based on price pivot areas in the past when you identify a trade. That way you know where price is likely to hesitate or turn around once it gets going in the direction you specified. Learn about Pivot Points here.
Why is this important? It helps you figure out whether you will be able to reach your target price before a trade expires. If the target price is located in front of a pivot area and you expect no great resistance along the way, you may be looking at an excellent trade. If the goal price is on the other side of a pivot area, you may encounter some difficulty getting there, and may not reach it at all. Those are trades you are less likely to win. Be patient, and always wait for the very best setups, and you will be on your way to winning amazing payouts on One Touch binary options!