Getting Your Binary Options Expirations Correct
It is true that in the binary options market, the outcome of a trade is in an all or none fashion, with the trader making a profit if the trade goes in the direction in which he has predicted. However, success in the binary options market is not only a function of getting the trade direction correct. It is also a function of getting your binary options expirations correct. It is possible to get the trade direction correct, only to be undone by a badly timed expiration setting. All it takes is for the trade to reverse against you and beat the strike price by even one pip, and that is it. This underscores the importance of getting the binary options expirations correct.
So what steps can you take in order to get your binary options expirations correct?
Step 1: Understand How the Asset You Are Trading Operates
It is more difficult to predict currency behaviour in the binary options market, but if you are trading commodities or stock indices which have specific trade times and specific behaviours, you can actually pull this off. Let me illustrate.
I once tried to trade the Dow Jones stock index, with a bearish outlook. My trade was in the green for a few hours, but a late surge of buying by bargain hunters turned my trade on its head and I was left dipping my fingers in cold water at the close of trading after getting them burnt in this trade. After a few tweaks and tests on demo, I found out that the prevailing market sentiment usually holds sway for the first hour of trading. Leaving trades open in the stock indices open till the close of the day will expose it to the activities of the bargain hunters who either wait for when prices of equities have fallen to cheap levels before they start buying, or wait for prices to have risen before they start taking profits. So if you are trading indices, time your expiries to close early when the market sentiment is fully at work.
Other assets behave in different ways but this just goes to show why studying the behaviour of your traded asset is a very important component of setting your binary options expirations.
Step 2: Use Charts that Correlate With Your Planned Expiry
If you try to use a four hour chart for a one hour trade expiry, you will get yourself into a bind. You are better suited trading a one hour expiry with a 15 minute chart, as this chart will show you when a short term trend is emerging. You cannot trade short term trades with analyses done on long term charts. It will not turn out right.
Step 3: Use Some Common Sense
Is there any wisdom in setting your binary options expirations to extend beyond the times that high-impact news releases are expected? For instance, would you set a one-week trade expiry for a trade involving the US Dollar in a week when the Non-Farm Payrolls, Housing Stats and the ADP Employment change will be released? Set your binary options expirations to coincide with when there won’t be several competing factors of influence on your traded asset.