Binary options started out with a simple trading option, the most common and basic option called the High/Low. With time, many other types of trading were developed which are similar but yet different.Binary Options are generally based on Yes/No decision and each type remains true to this rule. Besides the High/Low option, the One Touch option is also based on the Yes or No scheme but in a slightly different way.
What is One Touch Option?
The One Touch option is a type of binary options proposition where the trader predicts if an asset price will hit the strike price determined by the broker on the upper or lower limit in the timeframe selected by the trader. This trading style is more complicated than the High/Low type, since it involves a more precise prediction. Besides predicting the movement of the price, traders also have to predict if the target price of the asset will be reached or touched in the selected timeframe, i.e. before expiry time.
How it works
The prediction can go both ways; you can either bet on the price falling below the starting price, or surpassing the starting price. The payouts are specified ahead by the broker, so you know in advance how much you are going to earn if you win. Since this is a far riskier trading method, payouts are significantly higher than with the High/Low option. You can get up to 500% (sometimes more, sometimes less) comparing to the average payout rate of 85% with High/Low. Nevertheless, bear in mind that the broker determines the payouts based on their evaluation of how risky the trade is. Also, if the price hits your predicted price before expiry time, you do not have to wait for the time to expire. You win as soon as the prices “touches” the target price. It is only important, that at one point in time, the asset price touches the target price even if it is just for a second.
One Touch Option in Action
Let’s say that you bet on a commodity price like petrol. Suppose that the price per gallon is $1.573 when you want to trade. Also, the strike price is set at $1.589 and the minimum investment required is $100 with a payout rate of 70%. If the price of petrol touches $1.589 at any point during the specified timeframe, you will earn up to 70% or $170 on your investment as the above-given data suggest.
Some brokers lately let traders set and specify the target/strike price. This means that you are no longer limited by the broker’s choice. This also eliminates the possibility of brokers to manipulate the market by displaying only impossible trades, and in this case, impossible strike prices. If you are looking for a broker, better opt for one who lets you determine your own target prices.
As a binary options trader, always try to rely on as much data as you can gather to incorporate them in your decision-making process regarding binary options. People often make the mistake of trading randomly, without any analytical approach or strategy. We know that it is not easy for beginners who have no experience, but the first step is always education and research. All brokers offer a variety of educational resources related to the market, the platform, account and the various features. Use it to your advantage and to avoid losing significant amounts of money. The One Touch binary options trading style, as already said, is very risky and can account for losses in less than 20 minutes. It is always a good idea to follow and monitor the asset prices and their movement. Have you noticed that they have been stable lately or are they fluctuating? The news give you various hints that you could link to your trading strategies. Try to develop your on trading style by gaining trading experiences, knowledge, and by incorporating and combining trading strategies. Binary options trading requires commitment, time, and money.
The One Touch Option and Profitability
The return rate increases proportionally to the span between the actual asset price and the target price. The return rate and gains increase with the growing span. If we take our petrol example above with a return rate of 70% on the above given prices ($1.573 and $1.589), the return rate would probably be around 85% if the target price was 1.599. This equals the rule: the higher the risk, the bigger the potential gain. Traders should develop the needed skills to calculate if the risk is worth investing. When a binary options broker offers a really high-yield target price, you probably should not enter the trade given that the risk is too high. Make sure to recognize the extent of the risk before every trade.
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