The Pros And Cons of Trade Types
When it comes to binary options trading, there are various trade types available. Some are more common than others and are available from most brokers while others have offerings that are bespoke to their trading platform. While some are straight forward, and less risky others are far more involved but return higher payouts.
More experienced traders will be familiar with the more complicated types of trades. Others who are just beginning their journey will be happy to stick with the more common ones until a point that they feel comfortable to take more risks. Some people make the mistake of trying to run before they can walk and losing money that they might not have done if they had started with the basics.
Finding what suits you will be about your knowledge of the markets, how long you have been trading and how much of a risk you are willing to take — the greater the risk, the more chance of achieving higher returns but also of losing more. Before you jump in with both feet, take some time to learn about the various types offered, followed by the different asset types.
In this guide, you will learn:
- What trade types are available from brokers
- The differences between various trade types
- All the advanced trading types that exist
Trade Types And Expiry Times
Most brokers offer a standard set of trade types that are available for all assets. These include the most popular Call/Put Options or, as otherwise known, High/Low. In simple terms, this means whether the price of the asset that you are trading on will go higher or lower than the current price by the expiry time.
Now the expiry time can be anywhere from 5 - 15 minutes to a few hours later on the same day. For those wanting shorter expiry times there are 60 Second Options, and for those preferring a more extended period, there are Long Term Options.
With 60 Seconds you have a very short window to get it right. 60 Second trades are for those who want to make their money in a short space of time preferring not to play the more extended game. For those who want to predict the outcome of an asset over the longer term, you can choose days or even weeks. Usually, this gets determined by the broker and what they offer.
Finding what suits you will be about your knowledge of the markets.
Commonly Used Trade Types
As well as the Call/Put and 60 Second or Long Term Options there are also others. These include One-Touch Options or No Touch as it is also known. One Touch offers higher returns than the Call/Put as there is more risk associated.
It works by you predicting the asset reaching a trigger point within an expiry time. The higher the trigger point, the riskier the trade and higher the payout. If the price reaches the trigger at any point within the allotted time, then you win the money. If it doesn't reach the trigger point, then you lose. You can also use the No-Touch version which means that it won't hit the trigger point.
Pairs are a good choice if you know your markets. With Pairs, you are trading on two assets and which will perform the best by the expiry time. It may be silver and gold for example if you predict that gold will outperform silver by the expiry time and it does then you win. If it doesn't, and silver performs best, then you lose.
Ladder Options are more complicated and require more experience. As with a ladder each point takes you higher. When trading Ladders, you have to reach different strike points at different expiry times. The more you hit, the higher the payout. These are some of the most complicated types offered.
Which Type Should You Choose
The right choice for you will depend on some factors. How much experience you have, how long you have been trading, which assets you are trading on, how much money you can afford to experiment with and how much time you have to dedicate to trading. There is no one size fits all approach when it comes to binary options.
Start with the basics and get used to trading before you do anything else. It is always a good idea to take advantage of the demo platform and use virtual money to practice. Let's say you have $10,000 virtual money. You can try small minimum trades with the basic call/put over 2-3 minutes until you get used to it then you might find you want to have a go at Pairs or Ladder trading.
You may decide to stick with one format and experiment with expiry times or to get used to trading in one asset type until you switch to another. If you have a full-time job or other commitments that mean you can only trade for short periods, then the 60 Second Option may be more suitable than long term. You may want to get a large volume of trading in a short space of time.
Which Yield The Best Results
As with all binary options trading, it is impossible to predict the outcome, only to predict what you think it will be. For those who are just starting you may prefer the simple High/Low type with a specific expiry time to suit you. If you learn to read charts effectively, that's going to help a lot.
The results will vary hugely depending on experience, skill, luck and judgement. If you only have a short space of time and want to make your money quickly, then you may choose 60 Second Options.
If you are happy to commit to more substantial amounts over a more extended period then you can still yield the same results it will just take longer. You may find a combination that works for you and are happy to stick with this formula; you may decide you want to hedge your bets and try some different trades over various expiry times.
One day you could make a lot, the next you could lose a lot. It does depend on the market. For those with more experience, they will have found what works for them and know when, where and what assets to choose.
Shelly is proud of her current position as Head of Brand for a well-known organisation that owns several brokerages in the trading sector. She’s consulted for us since 2015 and readers can benefit from her insider knowledge of how brokers work. Learn more.