Most of the people are aware of the fact that most of the binary options fall into three basic categories: digital, range, and touch. The adjective ‘digital’ is also used as a synonym of binary options themselves.
Digital trading, i.e. digital option trading, is the most known and popular in the field of binary options. Once fixed the strike price, traders should only decide whether the price of the option will increase or decrease before a given deadline.
The strike price is a fundamental term in digital options. The definition of this price varies between types of binary option. Therefore, a full understanding of this term is essential.
The exercise price of any option is the price used to determine the outcome of the option at the expiration time.
In digital options, the strike price is the market price of the property at the time the option is exercised. Other names for this option are “up / down” for the reason described above. Traders will buy a call option if they think that the asset will increase its price or a put option if they think that the price option will fall.
Digital options are basically ‘fixed options’. This means that the financial risk and the potential gain are fixed at the time when the strike price is determined.
Spread trading requires a lot more attention by the trader. The risk of financial loss is much greater. The trader buys or sells securities and the financial result is a function of both the performance of both the number of securities purchased.
The Touch Trading is a new type of trading binary options based on the principles of Forex trading. Beginners and professionals can easily learn how to take advantage of this new type of binary options.
In Touch Trading, a trader has to predict whether the price will touch a price set before the expiration time. If the trader’s prediction is correct and the price of good touches the target price before the expiry time, then the trader receives a return of between 75% and 81%.
Range options type challenge traders to predict whether the price will be in a predetermined range at the expiration time.
For example, a trader may want to purchase a range option for EUR / USD when it is trading at 1.2. This type of option defined by the contract could be between 1.1 and 1.3. If at maturity the price is 1.15, the range option will give a gain. In this case the trader will be able to get a return of 75-81% on their investment.
In trading binary options traders can choose 2 types of investment clicking on the button call or put option, i.e. purchase or sale. They do not have then to set a take profit or stop loss, as it happens in Forex trading because the gain or loss target is always fixed at the start.
Binary options trading is therefore purely speculative but the ease with which you can operate not be fooled, because it is a very risky and should be taken seriously and not as a bet on the underlying trend.
In short, the ‘digital option’ requires traders to decide whether the value of the asset goes up or down, the ‘range’ requires traders to decide whether an asset is in or out over a range of a declared price, and the ‘option touch’ requires traders to decide whether an asset is able to “touch” a certain price.
Usually people find that digital option is the most easy to use generating the maximum performance. Digital trading is more suitable for assets with a clear trend, range trading is best suited for activities with a clear ‘behavior’, and touch option is best suited for assets with high volatility.