Boundary binary options trades require that the price of a selected asset remain between a top and bottom price point throughout the contract time in order for them to yield profit. This is one of the best types of trades for times when market conditions are not volatile. Below are the top five tips for using this trade type.
1. Verify stable conditions.
Make sure that the overall market and the specific asset are stable in movement. Stability means that the price is ranging, or moving sideways. All asset prices are going to move up and down some, your goal is just to ensure that the price doesn’t touch or break out of the set boundary.
2. Pay attention to the expiry time.
Lengthy expiry times can allow plenty of time for the asset price to break out of the boundary. On the other hand, most binary options brokers do not allow traders to use this type of trade along with super-short expiry periods. Longer expiry times will offer higher profits, simply because they are riskier, but there is nothing wrong with simply locking in some amount of profit my selecting a shorter expiry time with less risk.
3. Watch your boundaries.
Risk also changes along with the distance between the boundaries. When these are placed close together, the odds of a break are going to be much higher than if they are spaced well apart. Again, with higher risk comes higher prospective profits. Even so, many binary options traders, especially those who follow sound money management plans, are perfectly contend with making sure that some amount of profit goes into their trading account.
4. Avoid trading around press releases.
Boundary trades can be perfect for times just before press releases because during these times investors are likely to take the “wait and see” approach. However, once information related to your asset has hit the presses, the price may start to suddenly move, and may move quite a bit. This could of course send it out of the boundary and cause your trade to finish out of the money. It’s wise to simply avoid this trade type at certain times.
5. Use both forms of analysis.
You’ll need to verify that nothing is going to massively impact market sentiment, but will also need to verify historic prices. Technical analysis should include a consideration of the highest and lowest all-time prices that the asset has reached. You’ll also want to know the average price, as this will tell you the “happy place” for the asset price. This is where the price is likely to hover and should help you envision a reasonable boundary.
Boundary trades can be extremely profitable and serve as one of the top choices for times when market conditions are stable. For some, this type of binary options trade is their preferred type. For others, it will be kept on the back burner and only used when conditions are optimal. Either way, so long as it is used correctly, you’re likely to earn money.