Currently, there are many types of binary options. Simple high/low or Call/Put options generate less profits than, for example, the Range binary options. But with that, more complex contracts bear the heavier risks. In this article we are considering the range contract in particular.
What are Range binary options?
Range tool on the platform of the 24option broker
What does the range contract type appear to be? At first sight, everything is fairly simple. A broker determines the range and a trader has to make a decision, whether the price will stay within the range or will it exceed its boundaries by the time of expiration. Trading in a range means that the price does not have to touch any of the boundaries determined by a broker. This is why this type of contract is complex.
When choosing the classic Call/Put option, the trader simply has to determine the direction of the market’s movement without a reference to the certain levels. In this case, it is not important, whether the price will move through five or one hundred points. If a trader determines the direction correctly, a profit will be earned.
When it comes to the Range binary options, everything is slightly more complex here. In this case, the most important is whether the range’s boundaries are preserved by the time of expiration. For this reason, the number of points that the price can move through in the certain direction becomes important.
Trading with this type of binary options is the best when the market has a flat or, in other words, a sideways trend established. It is important to understand that when you trade this type of option it is desirable to pay attention to the macroeconomic calendar because if some important statistics is expected by the time of expiration, a momentum in the market is possible.
Range binary options: trading strategies
One of the most important strategies that can be applied in trading this option type is the triangle. Though it is believed that trading within a triangle is not the best decision, it is the most profitable for the range option. This is because during the formation of this pattern, triangle’s boundaries taper gradually. Therefore, probability of a breakout is minimal.
If a trader has noticed the pattern’s formation on a chart, he can nearly determine the levels that are outlined by the triangle’s boundaries. Therefore, if the range’s boundaries offered by a broker exceed the triangle’s boundaries, you can buy that kind of contract confidently.
Another strategy that can be applied in order to trade with the Range binary options profitable is the trading channel with a small inclination. If a trader sees that there is a sideways channel formed in the market and it has a small inclination up or down, he can calculate, whether the price will exceed the range’s boundaries by the time of expiration.
If according to the calculations the price is not expected to exceed the range, then a trader can buy an option. Lastly, the wedge strategy can also be applied. But it is necessary to remember that in this case the best is to trade during the formation’s process. In other words, when a price is within a pattern and no breakout of its boundary has occurred. This is because that after the breakout there can be a fairly strong momentum.
Therefore, the Range binary options provide an opportunity to earn the large profit by buying the certain underlying asset. However, the risk grows together with the profit because a price can exceed the range any time. For this reason, we recommend using different strategies in order to trade with such contract’s type profitable. And you can use not only those strategies that were mentioned above.