Binary Options - Ranges
Once you have been trading binary options for a while you may become bored with the standard options and look for something a little more challenging. Range trading is one way of livening up the trade, it is also known as boundary trading and involves more than just setting a trade in motion and waiting for the trade to expire. Experts who study assets state that the majority of assets will move within a relatively narrow field up and down from their average price. This information can be used to create arrange at which you believe your asset will trade within.
In effect you will need to calculate how far your asset is likely to move up and down in price within a given time period. The closer you can get your range, or boundaries to the current price the higher the risk will be and the bigger the payout. You can also choose to state that the asset will move out of a range as defined by the broker.
For example; you decide to trade in USD/EUR. The rate is currently 1.19 and the broker defined range is .99 to 1.28. Your research suggests that the rate should reach as high as 1.34; in this case you would place an out of range trade. Providing the rate moves to 1.29 or above then you have predicted correctly and you will be in the money! The percentage payout will have been defined before you committed to the trade.
Not only have you needed more skill and knowledge to make this trade you will also have the satisfaction of knowing you got it right, at worst you already know what you would lose on the trade.
Of course, this is a tricky field to navigate. If the experts are correct and the asset usually stays within a given range the odds are already stacked against you. You should not be too hasty to jump in with an out of range trade. Ideally you should see two points of resistance; this will make it very likely that the asset will trade outside of its normal fashion. Providing you have picked the right direction for the price movement you will then stand a good chance of receiving a return on your investment. It is very easy to get carried away and see one area of resistance and assume the price will move out of range; however this may not be enough by itself as there are always other factors involved in price movements. This is especially true when you are dealing with currencies which can be influenced dramatically by government intervention.
The best approach to this type of trading is to monitor the range and the resistance which may affect this range and then compare these figures and information with historical trends. Some currencies have a history of big fluctuations and you may be able to use this to your advantage. Equally a price movement may simply be a corrective measure or a reaction to a bullish market. You need to be certain that a previous trend happened for the same reasons as the current resistance; this will make it much more likely that the trend will repeat and you will be able to get a good return on your trade. This approach will also help you to calculate the timeframe you should apply to your trade, you then need to simply calculate how much you wish to invest.