3 Binary Options Trading Systems All Traders Need to Know
Well now that we know that the most lucrative binary options trading strategy is to trade the news, what is our binary options trading system? First you must understand the 3 types of binary options trading systems that can be traded and then determine which type fits the trading conditions.
3 Best Binary Options Trading Systems
There are three different types of trading systems for binary options that are common amongst most brokers:
1) High/Low Trade (aka the “Up/Down”)
The first type of binary option trading system is the High/Low trade, also known as the Up/Down. Quite simply, this is what we talked about in our binary options for beginners article (see link in opening paragraph). Will the asset finish higher or lower from the strike price within a given time period? The strike price is the target price the trader selected and is the traders form of reference. Some platforms also call this the Rise/Fall binary option trading system.
2) In/Out Trade
The second type of binary options trading system is the In/Out trade. This trade is also called the tunnel trade and the boundary trade. This type of trade is for trading consolidations (In) and breakouts (Out). The way this works is the trader identifies the price range using two price targets. The trader then purchases an option if the market will stay (In) the price range or break (Out) of that range.
3) Touch/No Touch Trade
The third type of binary options trading system is the Touch/No Touch option. The Touch option is purchased if the trader thinks the price will Touch the targeted price at least Once during the option time frame. Likewise, a trader purchases a No Touch option if they think the market will not touch the targeted price.
There is also the Double Touch and Double No Touch. This is where the trader sets 2 price targets and purchases an option that both targets will be touched (Double Touch) or not (Double No Touch). This is for very volatile markets.
Follow The News And Data
In my eBook, “Everything You Need to Know About Binary Options,” I talk about this same subject. Trading the news is a technique to trade equities, currencies and other financial instruments on the financial markets. Trading news releases can be a significant tool for financial investors. Economic news reports often spur strong short- term moves in the markets, which may create trading opportunities for traders. Announcements about corporate profits, a change in management, rumors of a merger, are events that can cause a company’s share price to move wildly up or down. Interest rates, unemployment and export rates, or the central bank’s policy shifts, can cause a deep change of an exchange rate.
Economic data tends to be one of the most important catalysts for short-term movements in any market, but this is particularly true in the currency market, which responds not only to U.S. economic news, but also to news from around the world. With at least eight major currencies available for trading at most currency brokers and more than 17 derivatives of them, there is always some piece of economic data slated for release that traders can use to inform the positions they take. Generally, no less than seven pieces of data are released daily from the eight major currencies or countries that are most closely followed. So for those who choose to trade news, there are plenty of opportunities.
Trading news is harder than it may sound. Not only is the reported consensus figure important, but so are the whisper number and the revisions. Also, some releases are more important than others; this can be measured in terms of both the significance of the country releasing the data and the importance of the release in relation to the other pieces of data being released at the same time.
What Are The Key Releases?
When trading news, you first have to know which releases are actually expected that week. Second, it is key for you to know which data is important. Generally speaking, these are the most important economic releases for any country:
- Interest rate decision
- Retail sales
- Inflation (consumer price or producer price)
- Unemployment
- Industrial production
- Business sentiment surveys
- Consumer confidence surveys
- Trade balance
- Manufacturing sector surveys
Depending on the current state of the economy, the relative importance of these releases may change. For example, unemployment may be more important this month than trade or interest rate decisions. Therefore, it is important to keep on top of what the market is focusing on at the moment. Bloomberg has an economic calendar that I highly suggest you bookmark and watch closely.
How Do I Actually Trade The News?
Each day in the binary options news section of OptionsGain, I post the day’s economic releases with their times, previous reading, the forecasted reading, and what asset will be most affected once the news is released. These are the most important data releases for the day. There are others, but these are the ones that will have the most affect on prices.
The most common way to trade news is to look for a period of consolidation ahead of a big number and to just trade the breakout on the back of the number. This can be done on both a short-term intraday basis and a daily basis.
For binary options traders concerned about volatility on news day, it is best to trade Double One-Touch Options, One-Touch Options, and Double No-Touch Option.
A double one-touch option has two barrier levels. Either one of the levels must be breached prior to expiration in order for the option to become profitable and for the buyer to receive the payout. If neither barrier level is breached prior to expiration, the option expires worthless. A double one-touch option is the perfect option to trade for news releases because it is a pure non-directional breakout play. As long as the barrier level is breached – even if the price reverses course later – the payout is made.
A one-touch option only has one barrier level, which generally makes it slightly less expensive than a double one-touch option. The same criterion holds – the payout is only made if the barrier is breached prior to expiration. This is a good option to buy if you actually have a view on whether the number will be stronger or weaker than the market’s consensus forecast.
A double no-touch option is the exact opposite of a double one-touch option. There are two barrier levels, but in this case, neither barrier level can be breached before expiration – otherwise the option payout is not made. This option is great for news traders who think that the economic release will not cause a pronounced breakout in the currency pair and that it will continue to range trade.
Binary Options Trading Signals
Now that you have a trading system to go along with your trading strategy, we will now introduce you to Binary Options Trading Signals. In this article I will show you examples on the charts of trading setups that you need to be on the look for to make you money!
