When trading binary options, traders will have several different instruments to choose from. Although the basic Put/Call trade remains the most popular, it certainly is not the only option. Each instrument will provide the chance to profit from specific types of price action. This is a huge advantage to the trader who is able to analyze the market with some degree of accuracy. Touch trades are special in that there are two types – one for flat markets and one for trending markets.
A One Touch trade requires just that, one touch, to be profitable. The price of the selected asset will need to reach a pre-determined price level in order for the contract to finish in the money. The starting, or entry price, will be the starting point. The overall level of risk can be assessed by seeing just how far the entry price is from the target. A wide gap between the two will mean that the level of risk is high, while a smaller gap represents less risk.
Within most binary options platforms, this instrument is presented as a high-yield type of trade. This means that it will be riskier than other instruments. However, the offered payout rates will be substantial, often somewhere between 200% and 1,000%. Most One Touch contracts are available for purchase on the weekend and carry an expiry time of approximately one week. Standard versions of this trade may also be offered, along with lower risk and lower prospective returns.
The No Touch instrument is one that should only be used when markets are flat, or range-bound. The reason for this is that the asset price will need to not touch the pre-determined target in order to be profitable. Here, a wide gap between the entry and target prices will represent lower risk, while a smaller gap will be much riskier. Similar to One Touch, these contracts are most often offered as a high-yield binary options trade, but they can be offered as standard trades as well.
Although not extremely common in modern platforms, “double” versions of these trades do exist. These typically provide two targets and may provide the chance to earn more profit or minimize loss. In the case of a double touch, a large return would be provided if both targets are reached. Should one reach and the other does not, the loss amount would be minimized. A double No Touch would be similar, with a large return being paid out if neither target was touched, and reduced loss if one of the levels is exceeded.
The most common type of touch instrument is the One Touch. This type of investment is not without its fair share of risk, but it does present the opportunity to earn a large return when prices are trending in the direction of the target price. No Touch is less popular, as there are instruments such as Boundary and Range which are also suitable for flat markets, but tend to offer less risk. Those who are risk-adverse will likely want to use these instruments sparingly, but should not overlook the huge profit potential they offer when market conditions are optimal for their execution.