Boundary binary options trading 2020 - trade range

Boundary binary options trading 2020: how best to trade them? Our guide explains how to use knowledge and develop a trading strategy.

The markets usually run in only two phases, namely in trends and sideways phases, also called "consolidation". In most cases, consolidation means that the demand-supply ratio is balanced or market participants are uncertain about the further course of the prices.

During these phases, prices fluctuate between relevant resistance and support. If you break it down, consolidations are also characterized by small trends. Many traders take advantage of these trends and the fact that they know that the trend is likely to turn into resistance or support. Of course, sideways phases are not as precise in reality as in the exemplary illustration. Often sideways phases move with a certain tendency.

The chart for the US index S & P500 shows how sideways phases are in reality. You can clearly see that resistances and supports cannot always be precisely defined. However, consolidation can be seen even with a further upward trend.

Most brokers offer the trading type range or boundary. With the broker OptionFair, range options are called the limit.

How do you trade long-term range options?

First of all, every trader who wants to trade range options must be clear that the Range trading requires prior analysis. At least if you want to trade options with terms of several hours. Therefore, the question always arises: When are sideways phases likely?

  • Sideways phases always occur after a dynamic trend phase
  • Sideways phases are more likely
  • <126 on quiet days (little economic data)>

    These two findings alone can help with planning. First you identify a strong trend that is expected to continue. Then you wait until the trend weakens again. As a result, the course begins to fluctuate between resistance and support.

    You can then count on the consolidation to continue provided that no relevant economic data or news are published on that day. Data is often a source of inspiration and ensures that the trend continues again.

    Boundary binary options trading 2020 - trade range

    How do you trade short-term range options?

    The example presented above shows range trading on a somewhat longer term Base. Basically, prices are no different on a short-term basis, namely in trends and consolidations. Even more, sideways phases are more pronounced in the short-term area. While a range in the 2-hour chart (above) shows a certain upward trend, the 15-minute chart for the US index S & P500 shows very clearly where the sideways phases are. They are not exactly precise, but they are clear.

    If you want to trade a range option on a short-term basis, you analyze the chart and identify a range on a 15-minute basis. In many cases, such phases also occur at night, as the example shows.

    The trader has several options to trade range options through the OptionFair broker. He can bet that the price is within or outside the specified limit. These are the classic limit options. The dealer can achieve a return of 70% on his stake. If the stake was € 500, the payout would be € 850 if the outcome was successful.

    OptionFair also offers the high yield limit options. Here, the dealer can achieve 200% on his stake. What is special about this type of trading?

    With the high yield limit, the trader can only bet on whether the price will be outside the specified limit after the term has expired. Predicting this is of course somewhat more difficult than using the classic range options - hence the high return. However, the trader could try to take advantage of the fact that a range often narrows like a triangle.

    Statistically speaking, narrowing the sideways phase is highly likely to result in a dynamic breakout movement. This could be used to speculate that the price will be out of range after the expiry.

    You can clearly see such a narrowing in the chart. In this case, it is not important in which direction the range is left, but whether the price remains outside this range.

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    Conclusion

    Range or boundary options are not easy to act. But the bottom line is this:

    1. Range options can be traded well on a short-term basis because sideways phases are more pronounced.
    2. A previous analysis is essential.
    3. Lateral phases occur according to dynamic trends, on quiet days and at night.
    4. For range options where there is speculation about a break out of the range, narrowing can be used.

    Range options are somewhat higher in difficulty and risk than the classic call / put options. As a result, in most cases, they also generate more returns. Traders specializing in range trading should therefore benefit from these phases in addition to trend following.

    Boundary binary options trading 2020 - trade range

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