Trading From Range to Boundary

Binary Options University October 15, 2014 Looking at a Trade

While most types of binary options trades rely on price movement if they are to be profitable, there are several trade types that are dependent upon limited price movement. These options are suitable for times during which an asset price is somewhat stagnant, with no strong market sentiment shifting it in either direction. Although similar, it’s important to know the difference between Range, No Touch, and Boundary contracts.

Boundary and Range trades include two set price levels, one higher than the current asset price and one lower. No Touch options can have either one or two levels, depending on how the platform is designed. The key to profiting with each of these investments is to not have the asset price exceed these levels while the contract remains open. Should the asset price reach or exceed these levels, the investment amount is lost.

All target price levels are provided upfront, telling you exactly how tight or wide the range is. With a smaller gap between the two comes an increase in the overall risk level. A wider gap will allow the asset price more room to move about without causing a loss, so the risk level is decreased. With each of these trades, higher return rates are offered when the level of risk is also higher. Even so, there is no shame in opting for less risky options with a slightly lower return rate.

Typically, Range and Boundary trades are going to provide the highest returns because they are often presented along with limited space for price movement. However, No Touch trades are often presented as “high yield” investments and as such can offer return rates of as much as 600% within some binary options platforms. Impressive return rates will mean very little if you are not able to pinpoint underlying assets that are exhibiting limited price movement.

Not every asset class is going to be a wise selection for these types of investments. Currency pairs are a prime example. The trade volume within the Forex market is massive, which indicates that brisk price movement could present a problem. Stocks can be a fine choice when the investor sentiment surrounding them is limited. The same can be said of commodities and indices. With all asset classes, be sure to refer to an economic calendar prior to trading to ensure that no financial or economic data releases related to your chosen asset are set to be released near the time of your trade.

At a base level, Range, No Touch, and Boundary are all going to be suitable selections when selecting an asset that is trading within a limited range. Pay special attention to expiry times. Shorter expiry periods allow less time for the price to move into the undesired territory. Longer expiry periods will increase the overall risk by allowing more time for substantial price movement to occur. When in doubt, opt for reduced expiration times for each of these binary options trade types.