The High/Low binary option is the most common trading strategy used in binary option. This is a type of binary trade where call option will be purchased if the investor believes the price will end up above the strike price, or put option will be purchased if it’s the other way around (below the strike price on expiration). In the event that you purchase such contract, you just need to determine whether the price of the underlying asset will be higher or lower than for that instance.
For a trader to use High/Low binary trades, they must do the following:
– Identify what asset he wants to trade with.
– Determine the strike price that will be used as the trade benchmark.
– Select a trade direction (which can either be “call” or “put” as described above).
– Indicate an expiration date.
– Pull the trigger.
Since these are normal Binary Options, you can just expect two possible results: the price of the asset can be higher or lower than the current price. However, by the time that you are in the right prognosis you can expect higher returns which are usually determined by the broker and this is also the reason why it is also known as digital options. During the holding period, you can just neglect the exchange rates because whether it goes down to 100 pips or up to 101, you will still get a profit.
This strategy has been very popular because it is easy to use and at the same time it has a lot of benefits compared to trading regular stocks or forex market. One of the key benefits of using High/Low trading strategy is that it is flexible making it easy to apply in all market conditions. The simple higher or lower options described above can be traded in both trending and sideways markets as they do not require price to be necessarily trending strongly in one direction in order to be successful. Again, all these options need is for price to close fractionally higher or lower to provide the trader with returns of up to 85%.
Another advantage of using this strategy is that it doesn’t need either a stop loss or a take profit target. In this case, the trader will just need to focus on is the expiry time that the option will need to achieve its goal and that is when the potential profit or loss has been identified. Once the trade is active the profit and loss cannot be adjusted and there will be no temptation for a trader to change strategy or extend losses in cases where a trade is looking unsuccessful.
It looks simple and easy but keep in mind that the actual trade ends in profit is not that easy. This is due to the fact that some brokers will only allow a minimum expiry of at least 7 days, making it more difficult to ascertain what the behavior of the price will be.
As a binary options trader, how can you successfully trade the High/Low trade?
Some analysts would suggest the use of news releases to trade this type of binary option, but the truth is that this is not practicable for a number of reasons. You can only use this on broker platforms that allow expiration days of between 3 hours to 3 days, as this is when the news effect is at its strongest levels. Attempting to use news events outside this time frame is unreliable. Even when you are allowed to use shorter expiry deadlines, the bet prices would have been adjusted so much that the payouts will be much smaller when compared to the staked amounts. It is preferable to aim for a risk-reward ratio of 1:1. Trades where there is more risk than reward are not very desirable.
That leaves us with the option of using technical analysis. The logic here is to use strategies that are determinants of price action, such as using chart patterns. If I were to trade a “High” binary, I would be looking for the presence of bullish reversal candlesticks, or bullish patterns such as double tops or ascending triangles. Conversely, I would be using bearish reversal patterns or triangles if I am putting my money on a “Low” binary.
Many traders are usually tempted to gamble on the High/Low trades. Just like in other financial markets, there is no place for a hunch trade. You cannot allow your money to run on the uncertainty of hunch trades. Use strategies that will clearly tell you where an asset is heading, and then you would be able to tell if the asset will end up as a “High” or on a “Low”.
Opening a binary options trading account takes two minutes and traders can be experiencing the high profits available from both higher/lower options as soon as they have registered. This is known to be the simplest way of trading with binary options that yields higher amounts of returns and is easily customable which gives you a lot of benefits compared to the use of other options. Despite all of the advantages, it is still important to fully understand the risk behind trading with binary options.
Although you can play safe with this particular strategy it is still best to know what fits your needs and how you will be able to achieve your goals. There are other options and strategies to choose from, you can just simply navigate through our website and read through the other available strategies that you might be interested with. We offer a wide array of options to choose from depending on the trader’s preferences and how you would like to manage your binary options.