Type of Binary Options: High/Low
High/Low binary trades are one of the most traded type of Binary Options. In the High/Low binary trade, traders purchase a call option if he/she is to believe that price will expire at price where it’s above the purchased price (strike price). Otherwise, traders will purchase a put option if he/she is to believe that price will end up expired at price where it’s below his purchase price.
How to execute a High/Low binary trade?
In order to successful execute a High/Low binary trade, traders usually follow the following procedure:
- First and most important of all, determine the asset where you want to trade.
- Secondly, determine timely your strike price ( the price that you want to purchase the options)
- Choose your trade direction ( It would be a “call” if you believe that price will be above purchased price after expiration and it would a “put” otherwise.)
- Another important factor is timely manner of your trade. Choose when the trade will expire.
- Final step is just a click of a button. Click trade.
This 5 steps sound pretty easy but you will need market understandings to be able to end the day profitable consistently. You will not be able to choose the expiration you want but there’ll be a list of fixed expiration time. Smallest expired time-frame is usually the 60 seconds binary options, then 10 minutes, 15 minutes to up to a week expiration time. Image below is a typical High/Low binary options trade.
From the image above, you’ll see the 24option trading platform where you need to make a decision whether you want to call or put that specific asset. As you could see, the current price is at 560.060, the asset is Apple Inc. Your ultimate goal is to predict whether price is going up or down from that price, at expired time. Choose whether it’s High or Low, corresponding to Call or Put, then enter the amount of money you wish to invest and place BUY. If you win the trade, your expected return will be 81% of investment, it could go as high as 95% return of investment for certain assets. Therefore, for example, you invest $100 and click BUY, if you win the trade, you’ll get $181 back including your winning amount and initial investment.
On the right of the image is the chart of Apple asset which you could virtually see how price and your current trade going. You won’t have much better price than that for most Binary Options brokers because it would take a lot of server’s resources if they are to add more features.
Strategy to trade High/Low binary options?
There’s a huge debate among news traders and Technical Analysis traders. News traders claim that, during news time, it is the best time to trade High/Low binary options. It could be right but only for certain requirements to follow suit. You should only trade news on higher expiration time. It’s advisable to be from 3 hours to 3 days. If you are attempting to trade during news time, you’ll carry a huge risk because liquidity during news time is extremely low. That’s the reasons why you see huge movement in a very small time span because traders will find it hard to match their price with the other receiving end. When everyone is waiting for the news to settle, why do you have to join the uncertainty? It’s well-known fact that price during high-impact news are almost non-tradable and it’s almost random. Therefore, it’s advisable that you trade higher expiration time or just wait for the dust to settle before trading again after a few hours.
Fundamental analysis couldn’t work, that leave us with the only one option left, which’s technical analysis. Price Action is the reflection of people’s behavior and it’s widely believed that those behaviors will repeat during the time of greed, scare, panic, etc. The basic logic is to trade based on the price patterns that are created over and over again. So, if I am anticipating price will likely to go higher (Put), I would be looking for a bullish candles, bullish price pattern or price action around the support levels.
There are some traders who attempt to gamble on the High/Low trades and I could tell you that you’ll definitely on the losing side in the long term. The fact is that the brokers have the edge above you when they only pay you about 89% return of investment, but when you are on losing side, you’ll lose your whole investment. Therefore, gambling on High/Low trade will result in losses for sure. What you should do is use technical analysis and fundamental analysis to aid yourself tools and analysis to get better edge than the brokers.