The boundary out binary options trading strategy is a boundary trade that relies on heavy volatility in order for it to be successful. The basic premise is that you execute a boundary trade with the hopes of the final price landing outside of the range that is given for you at the end of the trade. These trades are tougher than the traditional call/put options that most of us are used to, but the rewards for a patient and thorough trader can be great if you find the right assets and timeframes to work with.
The boundary out strategy will be most successful when you can enter the position before the volatility begins. This will typically ensure that the asset is both still available for trading, and that you are getting as high of a rate of return as possible. In many cases, brokers will cease offering these types of trades when they are most likely to be beneficial to you, and this requires you to be quite proactive if you want to be successful with it.
The easiest way to accomplish this is to have a firm understanding of the economic calendar. If you can enter a trade like this before the event that is scheduled occurs, with an expiration after the event, your odds of success go up dramatically if that event were to cause volatility. It won’t happen with every trade you execute like this, but if you are able to find high yield trades with a large enough payout rate, you only need to be right once in a while for this strategy to be profitable to you.
Let’s explain this one more time with an example. Let’s say that you know that the U.S. Federal Reserve is making an announcement later today, and that if that announcement were to cause volatility, then the U.S. dollar will begin to move violently and quickly compared to the euro. You look for a high yield boundary trade with an expiry time after the event is scheduled, and then execute it. Now, if the Fed does make the announcement that you were hoping for, and the hoped for volatility occurs, the wild whiplash motion of the EUR/USD chart has a good chance of ending up outside the self-imposed range that your binary options broker gave for the trade.
You can also use this method with one touch trades, if you anticipate the movement going in a specific direction, although these will be tougher since they are more pointed when it comes to the strike price.
Drawbacks to Boundary
High yield trades are typically not a great idea, but if you are able to use this method successfully, your odds of success go up dramatically. But do know that because it’s a high yield trade, your correct trade rate is going to plummet significantly. The only way that this method will be successful is if you can find rates of return that will not harm you if you go from being correct 65 percent of the time to being correct only 15 percent of the time. This is an extra step of work for you since it requires more math, and because you might not be able to give an accurate estimate when it comes to the expected correct trade rate you will have at this new type of trade. There’s a big level of uncertainty, and many traders will lose money as a result of this. Be sure that you know what you are doing when you try this method out, and you are able to compensate for the additional risk that you are taking on.
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