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Touch & No Touch Options
When you start trading binary options, you’ll note you have access to several types of instruments. The most common and simplest among them are call and put trades. These are predictions that the price of a trade’s underlying asset will move up or down (respectively). Beginning traders typically start with call/put trades because they’re easy to understand. After they gain some experience, many venture into one touch binary trading.
The above example is from 24Option. The white jagged moving line is the current price point. The light gray section at the top of the chart is the ‘touch’ line. If you were to select ‘touch’ and enter a trade amount and click ‘buy’, all that you have to do is have the price move up and hit that point.
Sometimes called touch or no touch binary options, these trades are slightly more complicated than calls and puts. More than merely predicting the direction an asset’s price will move, you must also predict whether that price will reach a specified target (or strike) price. This will become clearer below as we explain, in detail, how one touch binary options work.
How Touch And No Touch Binary Options Work
As noted, with one touch trading, you are predicting whether an asset’s price will reach a certain level before the trade expires. This level can be above the starting price or below it. Your trade becomes immediately profitable if the target price is reached. The trade is closed and the payout – you’ll know the potential return and corresponding payout ahead of time – is deposited into your account.
We’ll use a simple example to illustrate how this works.
Suppose the underlying asset is gold. The spot price – the price of an ounce at the time you execute the trade – is $1,605 and the strike price is set at $1,620. (Some binary options brokers will let you set the strike price.) Further suppose the trade requires $100 in capital, and pays out $170 if the strike is reached.
Here, your trade is profitable if the price of an ounce of gold reaches $1,620 at any time before the trade expires. Once it hits that price, it no longer matters if the price plummets. It has “touched” the target level, and $170 is added to your account. If the price of gold doesn’t reach $1,620, you’ll lose your investment.
24Option.com “No Touch” Example – You Win If Price Does Not Touch Top Of Light Gray Area
No touch binary trading works in the opposite fashion. You are predicting that the asset’s price will not reach a particular level. As with one touch binary options, the target level can be set above or below the asset’s spot price. (In most cases, you set the level.) Here, if the asset’s price reaches the target before expiry, the trade is immediately unprofitable. You will lose your investment.
To demonstrate, let’s continue with our gold example…
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Suppose the spot price is $1,605 and you have set an upper limit of $1,620. With no touch binary trading, this means your trade will be profitable as long as the price of gold remains below $1,620 until expiry. If at any time while the option is active the price of gold hits the target, the trade is closed out of the money.
You can also set a lower limit. For example, you can predict that the price of gold will not fall below $1,590 before the trade expires. This works in the same way as the trade described above, but as a mirror image to it.
Returns And Profit Potential On Touch Binary Trading
When you start to trade one touch binary options, you’ll notice the potential returns grow larger the further away the strike price moves from the spot price. For example, a one touch binary for gold with the spot price at $1,605 and the target price at $1,620 may offer a 70% return. The same trade with the target price set at $1,630 might deliver an 85% return.
Conversely, with no touch binary trading, the further away the target level moves from the spot price, the smaller the return. A no touch trade with gold’s spot price at $1,605 and the target level at $1,620 may return 65% on your investment. If you move the target level out to $1,630, the potential return might fall to 60%.
Basically, the greater the risk of losing your capital, the larger the potential return and profit you stand to gain. Exceptions aside, this is the general rule with all investment vehicles. Thus, when you see a binary options broker offering a high-yield touch option, realize that the risk accompanying the trade is higher.
This page will also cover the potential returns you can expect to see when you trade touch and no touch binaries. And of course,
Getting Started With One Touch Binary Betting
We’ll start by pointing you to several trusted brokers that offer one touch trades. However, 24Option is traditionally the best broker offering these types of trades on a regular basis.
If you already have experience with trading binary options, you’ll likely be comfortable with touch and no touch binary trades. In some ways, these instruments are little more than an extension of simple call/put trades. You’re still predicting the direction in which an asset’s price will move, but are also forecasting the extent of that movement.
If, on the other hand, you are new to binary options, start with calls and puts. They’re simple and elegant from a pure trading perspective. They can be executed and closed quickly – some in 5 minutes – which smooths your learning curve. Along the way, you can take the time to focus on a few preferred assets. Learn about the factors that influence their prices.
Once you have a fair grasp of simple binary options, move into touch and no touch trading. By the time you do so, you’ll be able to make better predictions about the price movements of your chosen assets. That is how successful – i.e. profitable – binary options trades are executed.
4 Reputable Sites To Trade One Touch Binary Options
Although one touch trading is technically considered to be an exotic form of binary options trading, most brokers offer it. The key is to identify three or four brokers you can trust. We recommend registering accounts with a few brokers so you can compare them side by side and ensure you are receiving the best possible returns for each trade. Below, we’ll profile four binary options brokers we’ve found to have great reputations, competitive returns, and a good variety of assets and instrument types.
MarketsWorld – If 24Option is one of the best-regarded brokers in the industry, Markets World is one of the favorites among veteran binary options traders, especially those in the US who have very few brokers to choose from. They maintain an office in New York, are known for their responsive support, and host trades covering a huge list of assets in the four major categories (stocks, currency pairs, commodities, and indices). They also offer free access to a live demo account. Visit Markets World and create an account to start trading one touch options today.
24Option – Arguably one of the best-regarded brokers in the binary options business, 24Option is our top choice for one touch binary trading. They use a top-notch trading platform (OptionFair), offer competitive returns (65% to 350%, depending on the instrument), and maintain a relatively low minimum trade amount ($24). They also provide access to numerous binary option types, including high-low trades, range options, and 60 second binary options. Register an account at 24Option.com today to get started.
IQ Option – We like IQ Option for several reasons. They require a low minimum deposit ($10), which allows new traders to get started easily. They also maintain an impressive list of assets to trade, including 9 commodities, several stocks, and more than a dozen currency pairs. IQ Option uses their own proprietary trading platform, which comes with a feature called Option Builder. This feature allows you to customize your trades, giving you a lot of flexibility to match your trading activity. Visit IQ Option for more details.
Binary Mate – One of the first things you’ll notice at popular US facing broker BinaryMate.com is that the potential returns on their trades are slightly lower than those found elsewhere. The reason is worth considering. This broker provides a 15% rebate on trades that expire out of the money. If you incorporate this feature into your trading activity, it is possible to make more in overall profits than you might elsewhere. Another reason we recommend Binary Mate is because of their asset list. It is one of the largest we’ve found. Visit them today to register your account.
Those who seem to generate the best results with one touch binary trading are traders who have a strong understanding of their chosen assets. If you’re just getting started, here’s what we recommend:
Step 1: Visit the four brokers above.
Step 2: Register an account at each.
Step 3: Get some experience with call and put binary options.
Step 4: Move into touch and no touch trading to expand your profits.
One-Touch Binary Options Explained
With the one-touch binary option trade, the binary options trader selects a strike price above or below the current market price as well as an expiration time. The broker will offer him a payout percentage corresponding to his selection.
For the investment to payoff, the price of the underlying asset only needs to hit the strike price once before the option expires and does not need to exceed this level at the time of expiry.
Payout will vary greatly depending how far away is the strike price and the time till expiration. The further away the strike price, the higher the payout. The longer the expiration time, the lower the payout as one has more time to hit the target.
Unlike the common high-low variant where the payout rarely exceed 90%, the payouts for one touch binary options can easily exceed 100% and payouts between 200% to 500% are not uncommon.
It is entirely up to the trader how much he wishes to invest with each purchase of the binary option but the minimum and maximum he can put in with each option varies across brokerages.
One Touch Binary Option Example
EUR/USD is currently trading at $1.29. A binary options brokerage is offering 200% payout for the one-touch binary option with a strike price of $1.30 that expires in 5 minutes.
After tracking the price movement of EUR/USD for the past hour, the binary option trader believes that the price will hit $1.30 within the next 5 minutes and decides to invest $100 to purchase this one-touch binary option.
If EUR/USD goes up to $1.30 anytime within the next five minutes, the investment pays off and the trader earns a profit of 200% of his initial investment, which is $200.
However, if the price of EUR/USD never rise to the $1.30 price point during the whole 5 minutes, the trader will have lost his initial investment of $100.
Note that it does not matter whether the price of EUR/USD skyrocketed up to $1.40 or flash crashed below $1.00, both the profit and loss will be fixed at $200 and $100 respectively.
No-Touch Binary Option
Conversely, there is the no-touch variant as well. See No-Touch Binary Options.
What are the Main Types of Binary Options?
Learn how the One-Touch, No-Touch and Range/Boundary binary options differ from the common high-low viety and how to trade them. [Read on. ]
What Assets can be Traded using Binary Options?
Many of the most popular financial instruments such as currency pairs, equities and commodities are available to trade using binary options. . [Read on. ]
Binary Options: Trading or Gambling?
Is binary option a legitimate financial instrument or just another form of gambling. [Read on. ]
Binary Options & Trading Robots: A Perfect Match?
Unlike humans, robots have no emotion and do not need to rest, so they can make a lot more trades than humanly possible, combined with perfect consistency. [Read on. ]
Is Binary Options Trading a Scam?
Learn how you can get scammed when trading binary options if you are not careful. [Read on. ]
How to Select a Binary Options Broker?
With so many scam brokers out there, before you learn how to trade, one must know how to separate the wheat from the chaff and find a trustworthy binary options brokerage. [Read on. ]
Binary Options: Calculating Breakeven Win-Rate for a Given Payout
How often does my trades need to be successful in order to be consistently profitable in the long run when trading binary options. [Read on. ]
What Is a One-Touch Option?
A one-touch option pays a premium to the holder of the option if the spot rate reaches the strike price at any time prior to option expiration.
- A one-touch option pays a premium to the holder of the option if the spot rate reaches the strike price at any time prior to option expiration.
- One-touch options are usually less expensive than other exotic or binary options like double one-touch, or barrier options.
- Derivatives, like one-touch options, are not frequently traded by small investors.
Understanding One-Touch Options
One-touch options allow investors to choose the target price, time to expiration, and the premium to be received when the target price is reached. Compared to vanilla calls and puts, one-touch options allow investors to profit from a simplified yes-or-no market forecast. Only two outcomes are possible with a one-touch option if an investor holds the contract all the way through expiration:
- The target price is reached and the trader collects the full premium.
- The target price is not reached and the trader loses the amount originally paid to open the trade.
Like regular call and put options, most one-touch option trades can be closed before expiration for a profit or a loss depending on how close the underlying market or asset is to the target price.
One-touch options are useful for traders who believe that the price of an underlying market or asset will meet or breach a certain price level in the future, but who are not certain that price level is sustainable. Because a one-touch option has only a yes-or-no outcome by expiration, it is generally less expensive than other exotic or binary options like double one-touch or barrier options.
Derivatives, like one-touch options, are not frequently traded by small investors. There are some trading venues where they are available, but regulators in Europe and the U.S. have often warned investors that they may be overpriced. In many cases it is not possible to take advantage of that mispricing by becoming an option writer or seller. Binary or exotic derivatives are usually traded by institutions who can negotiate with each other for better pricing.
Outcome #1: Price approaches target price
A trader believes the S&P 500 will rise by 5% at some point over the next 90 days, but is not as certain about how long the index will remain at or above that price. The trader pays $45 per contract to buy one-touch options that pay $100 per contract, if the S&P 500 meets or exceeds that target price at any point over the next 90 days. Assume that two weeks later the S&P 500 has risen 2%, which has increased the value of the position because it is more likely that the index will reach that target price. The trader could choose to sell their one-touch option contracts for a profit or continue to hold the trade through expiration.
Outcome #2: Price remains flat or moves away from target price
Assume that a trader originally believed the S&P 500 would rise 5% over the next 90 days and opened a one-touch option trade to profit from his forecast. The trader paid $45 for one-touch option contracts that will pay $100 per contract if the target price is reached. Instead of rising, the index drops 3% on unexpected news a week later, which makes it less likely that the target price would be reached before the options expire. This trader may then decide to either sell the options and close the trade at a lower price for a loss or hold it in the hopes that the market recovers.
What is a Binary Option?
A binary option is a financial product where the buyer receives a payout or loses their investment, based on if the option expires in the money. Binary options depend on the outcome of a “yes or no” proposition, hence the name “binary.” Binary options have an expiry date and/or time. At the time of expiry, the price of the underlying asset must be on the correct side of the strike price (based on the trade taken) for the trader to make a profit.
A binary option automatically exercises, meaning the gain or loss on the trade is automatically credited or debited to the trader’s account when the option expires.
Binary Options Outside the US
Basics of a Binary Option
A binary option may be as simple as whether the share price of ABC will be above $25 on April 22, 2020, at 10:45 a.m. The trader makes a decision, either yes (it will be higher) or no (it will be lower).
Let’s say the trader thinks the price will be trading above $25, on that date and time, and is willing to bet $100 on it. If ABC shares trade above $25 at that date and time, the trader receives a payout per the terms agreed. For example, if the payout was 70%, the binary broker credits the trader’s account with $70.
If the price trades below $25 at that date and time, the trader was wrong and loses their $100 investment in the trade.
- Binary options depend on the outcome of a “yes or no” proposition.
- Traders receive a payout if the binary option expires in the money and incur a loss if it expires out of the money.
- Binary options set a fixed payout and loss amount.
- Binary options don’t allow traders to take a position in the underlying security.
- Most binary options trading occurs outside the United States.
Difference Between Binary and Vanilla Options
A vanilla American option gives the holder the right to buy or sell an underlying asset at a specified price before the expiration date of the option. A European option is the same, except traders can only exercise that right on the expiration date. Vanilla options, or just “options,” provide the buyer with potential ownership of the underlying asset. When buying these options, traders have fixed risk, but profits vary depending on how far the price of the underlying asset moves.
Binary options differ in that they don’t provide the possibility of taking a position in the underlying asset. Binary options typically specify a fixed maximum payout, while maximum risk is limited to the amount invested in the option. Movement in the underlying asset doesn’t affect the payout received or loss incurred.
The profit or loss depends on whether the price of the underlying is on the correct side of the strike price. Some binary options can be closed before expiration, although this typically reduces the payout received (if the option is in the money).
Binary Options and Regulation
Binary options occasionally trade on platforms regulated by the Securities and Exchange Commission (SEC) and other regulatory agencies, but most binary options trading occurs outside the United States and may not be regulated. Unregulated binary options brokers don’t have to meet a particular standard; therefore, investors should be wary of the potential for fraud. Conversely, vanilla options trade on regulated U.S. exchanges and are subject to greater oversight.
Real World Binary Options Example
Nadex is a regulated binary options exchange in the United States. Nadex binary options are based on a “yes or no” proposition and allow traders to exit before expiry. The binary option’s entry price indicates the potential profit or loss, with all options expiring worth $100 or $0.
Let’s assume stock Colgate-Palmolive Co. (CL) is currently trading at $64.75. A binary option has a strike price of $65 and expires tomorrow at 12 p.m. The trader can buy the option for $40. If the price of the stock finishes above $65, the option expires in the money and is worth $100. The trader makes $60 ($100 – $40).
If the option expires and the price of the Colgate is below $65 (out of the money), the trader loses the $40 they put into the option. The potential profit and loss, combined, always equals $100 with a Nadex binary option.
If the trader wanted to make a more significant investment, he or she could change the number of options traded. For example, selecting three contracts, in this case, would up the risk to $120, and increase the profit potential to $180.
Non-Nadex binary options are similar, except they typically aren’t regulated in the United States, often can’t be exited before expiry, usually have fixed percentage payout for wins (whereas Nadex payouts fluctuate based on the price paid for the option) and may not trade in $100 increments.
Binary Options One Touch Strategies
For those of you who have been trading options for sometime, you may have come across a One Touch Binary Option.
These are indeed quite interesting financial instruments and they allow for some pretty unique binary option strategies for traders to take advantage of.
They also allow the binary options trader to generate pretty large payouts. One touch options are usually much higher in strike than those of traditional high / low options.
We will take a look at some really interesting binary options one touch strategies that the trader can implement on a number of underlying assets.
Before we can do this, we need to take a look at the fundamentals of a one touch binary option.
What is a One Touch Binary Option
A one touch binary option is an exotic variant that will pay the trader out the profit from the trade if the price of the asset goes above or below a certain touch “level”.
This is in contrast to a traditional high low option that is merely a trade on whether the asset will go up or down in price over the life of the option. If you want to spruce up on your understanding on the topic, we have explained binary options previously.
You can have a one touch binary PUT and CALL option. Essentially, the one touch CALL will payout once the price of the asset has hit a particular level that is above the current asset price.
In contrast, the one touch Binary PUT option will only payout the trader if the price of the asset falls below a certain level.
It is also important not to confuse a one touch option with a Knock-in-option. A Knock in Option is a trade where the option will only begin once the level has been met.
A one touch option is the opposite where the trade starts at the outset and the trader will get paid out if it hits that level.
Given that one touch trading requires that the price of the asset is to hit a particular defined level, this allows the payoff in the event of a correct prediction to be as high as 500%.
Why the large payout you ask?
This is mainly due to the nature of the risk management at the broker. When they have traders who are trading normal high / low options, the broker knows the trades could roughly cancel each other out.
When it comes to a one touch option, the chance of reaching the one touch level is much lower than either the price going up or down. This is why the broker is able to offer such high returns.
One Touch Trading Strategies
One touch binary options are indeed the perfect instrument to use when one is using a technical binary option strategies.
Technical analysis is all about trading levels, and this is exactly what one touch binary options use as the determining factor in the payout.
Technical analysis will allow the trader to determine how likely the asset is to breach the one touch level and end up in the money.
There are a number of different technical analysis signals and trading indicators that you can use to formulate your opinion of likelihood, but we will look at 3.
RSI and Volume
When it comes to technical trading, two of the most important indicators that the trader will monitor is the volume and the RSI.
Volume is an indication of how much buying / selling is going on in the market. It is the total value of all transactions that are taking place.
Why is Volume so Important?
It is because volume is generally able to provide momentum to positive / negative price trends. If the price is going up and there is strong volume, it is likely to continue. The same can be said for negative price trends.
When it comes to the RSI indicator, it is best used for identifying if a level is “oversold” or “overbought”. It is a statistical indicator that has been used by technical traders for years.
For the RSI indicator, when it is above 70, this is usually considered an “overbought” level and when it is below 20 it is considered an “oversold” level.
Let us take a look at an example. In the below chart we can have the GBP/CAD cross. As you can see, the RSI indicator was showing an oversold level just after a large fall.
After this fall, there was a slight increase in the price and the volume had increased as well. This is an indication that momentum appears to be on the upside.
If the trader wanted to enter a one touch CALL option trade, they could target a level given in the chart. In this case, it is more likely that the price will hit the one Touch level and payout the trader.
We have previously covered binary Bollinger band strategies and they are very effective for traditional high low trading.
However, when trading one touch options, Bollinger band indicators can be a really powerful tool in your toolbox.
Bollinger bands are great indicators to help the trader identify resistance and support levels. They incorporate moving averages as well as volatility.
This means that Bollinger bands are helpful to determine whether a price has reverted from the mean. Statistically, this is essential to determine the likelihood of hitting the one touch level.
Essentially, if the price has broken through a resistance or support level, then it is likely that it will continue on its current trajectory past the levels.
We will take a look at a simple example on a SpotOption platform. We have plotted the 2,20 Bollinger bands (industry standard) around the FTSE 100 index.
As we can see in above image, the price of the index has breached the lower Bollinger band which is considered a bearish indicator.
This means that the trader should consider entering a one touch 20 minute PUT option which is much lower than the current level. This is in the expectation that the price will continue to fall.
Indeed, as we can see, the downward trend continues given the initial break that we saw below the lower Bollinger band (support level).
In this case the trader would have generated a sizeable return on their investment as the one touch level was considerably below the entry point.
The Moving Average Convergence Divergence (MACD) is another really important technical indicator that is offered by nearly all brokers.
What is the MACD?
It is another momentum indicator that uses two moving average indicators to give a sense of how entrenched a trend is.
The MACD is calculated as the difference between a short term moving average indicator and a long term moving average indicator.
When it is positive it means that the short term moving average is above the long term and the trend is positive and it is a bullish indicator. The opposite can be said for a negative MACD.
Taking a look at an example, below we have the MACD plotted for the CHF/HUF forex cross. You can see that the shorter term Moving Average (12 period) is above the long term moving average (26 period) and hence the MACD is positive.
This is an indication of a bullish trend and as such means that the pair is likely to continue climbing. The trader should consider entering a 20 minute CALL one touch binary option.
If the trader had done this at the first entry level with a 10 minute expiry, then the option would have hit the one touch boundary and paid out the win rate.
Trading one touch binary options can indeed generate the trader a much larger return than is possible with normal High / Low options.
Yet, there is a reason for this.
It is a risk return payoff. The chance of reaching the one touch level is less likely than that of the option just either up or down.
That is why you can’t treat one touch options in the same way that you do High / Low binary options. You should only enter the trade when you have a reasonably strong conviction that there is positive momentum behind the price movement.
If you have found that trading one touch binary options has been a reasonably profitable experience for you then there are one touch binary option variants that could be of interest.
There are no touch binary options which are merely the opposite of a one touch. They will pay out if the price of the asset does not touch a level.
There are also tunnel options which can be a combination of one touch and no touch options. These will pay the trader if the price remains in or goes out of a certain tunnel range.
Lastly, there is a new instrument which is currently on the market which is called a digital contract. Digital contracts are essentially a combination of a CFD instrument and a binary option and can have payoffs as large as 2,000%.
1st Place! Best Binary Broker 2020!
Best Choice for Beginners — Free Education + Free Demo Acc!
Sign-up and Get Big Bonus:
2nd place! Good choice!