As already said, binary options allow you to trade on stocks, commodities, currency pairs and indices. There are 3 types of binary options:
- One Touch/No Touch
Above/Below is the most popular binary option and the one that the majority of traders are familiar with. The trader has to predict if the price at the expiry will be “above” or “below” the strike (predetermined price).
We have a bullish strategy on cross forex EUR/USD with strike at 1,427, and we decide to buy an above option with expiry 8pm. If the price at expiry it’s above our strike we can have a return between 70% – 90%. If the price is below our strike we have a lost position (some brokers have a redemption up to 15%).
One touch/No Touch
In touch/no touch options the trader will predict if the price will touch the “barrier” or it will remain below it. The trader can have a return between 70-90% in case of winning. The payout will be zero in case of loss.
Range options ( called also “Boudary”) allow the trader to choose if the current price will be inside or outside the range at expiry. The range is predetermined.
All those types of binary options are used by traders combining technical and fundamental analysis. It’s important to use a strategy that can cover “best” and “worst” results in order to avoid errors in the future.