Crazy Markets – Trade or Walk Away
Those who trade binary options are given the opportunity to profit from all types of market conditions. Even so, there will be times during which unstable market conditions make this a tougher task. Volatile markets are not necessarily the enemy, but some extra thought will need to be given to whether or not to enter into trades when conditions are erratic.
There are really only two choices under such conditions – perform analysis to the best of your ability and trade anyway, or stop trading until conditions calm. The first consideration will be whether or not there is a suitable instrument to use at the time. Each instrument is designed to be used under various market conditions, ranging from flat to active. In general, the standard Call/Put trade is the best selection when markets are unstable, with the expiry time being selected based upon the expected time-frame for price movement.
Both technical and fundamental analysis should be completed along with all trades, but these become particularly important when market movements are erratic. The bad news is that analysis findings will not be quite as clear when price bounces are occurring. When investor indecision rules, there will be no discernible trend to trade along with. However, a check of high and low prices for the period being studied, along with a consideration of how close the price is to support or resistance, will certainly help with the decision-making process.
If large price spikes are occurring, the One Touch instrument may be a wise choice. This type of binary options trade requires the price of the selected asset to reach or exceed a target price. Often, this target is far from the entry price. Since there is more risk involved, the offered payout rates for these trades are quite high. Large spikes could allow the price to cover the necessary distance, touching the target and finishing in the money. Avoid this instrument if the asset price is not covering large distances.
If the price is merely bouncing up and down, not spiking, a Boundary or No Touch instrument can be considered for use. These instruments are designed to be used when price movement is flat, but they can also be used effectively when the price is merely fluctuating within a smaller range. Pay close attention to the expiry time, as a change in market conditions that occurs prior to the end of the expiry time could easily cause the trade to finish out of the money.
Unstable markets can cause plenty of frustration on the part of traders, as they can render analysis a tougher task and increase risk levels. No trader should ever feel pressured to trade. If conditions are not optimal, taking a short break from trading is an excellent idea. The platform isn’t going anywhere. It will still be there when conditions have calmed a bit. Everyone who does, or plans to trade binary options will need to establish some type of general guidelines for when to trade and when to walk away for a bit of time.