Range Options in Binary Options Trading Explained

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Options Types » Range Options

Find Out How Great It Is to Trade With Range Options!

It should not be a secret to anyone of you that financial market has been advancing as fast as almost you do by visiting our website and checking out the newest guides and tips for making more and more money. The quick upgrading of the binary options world is nowadays a thing we should definitely and constantly follow, because at some point, they might be a chance for you to be left behind the completion. You don’t want this to happen, do you? And you are super eager to be learning everything common and not that common as to the trading with binary options, aren’t you? Well, if yes, then, today we have a great new lesson for you – to find out how great it is to trade with range options.

Range or Boundary Options?

There is no difference between the two terms, but it`s just some brokers prefer to call the boundaries, while others are stuck to the classical name of range options. However, whatever you see, it will be always about the old, but gold range options. We call them old, because they have been on the market for several years, which, as you know, is very long period for the quickly advancing financial market.

What Exactly Range Options Are?

The range options allow you to settle two levels on the deal / trade you make. The first one is set “above” the present market price and the other one is fixed as “below” this value. Such a trade or contract, meanwhile, is quite similar to the well-known tunnel trade in regular trading with binary options that, as you know very well, has a payout to be given only if neither of the fixed levels is “touched” over the duration set on trade you have made. Be aware that binary range option types are attractive holdings for those of you, who have the intuition that a particular currency will end up in a particular trading value. This means that you receive the actual possibility to invest in predefined premiums as this will enable you to receive a maximum return on their trade no matter what type you have eventually chosen. On the other side the maximum final outcome of yours, as well as the risks can be determined preliminarily, which, as you might be already guessing will save you both – time and even money.

Why Trading With Range Options?

The range options or boundary binaries are very popular these days, because they give you both – freedom to fix different elements of your trade, as well as a chance to minimize your resources, which can be money, time for analysis and even efforts to start listening to your 6th sense. Though, you should definitely see the following list of features that in general can describe the binary range options and why exactly so many people have determined them as the top profitable and very easy to be learnt. So see why trading with range options now and consider if these pros will suit your personal trading preferences, as well:

  • Binary ranges minimize the risk for traders in such a way that they can even be aware of the risk level, itself, at any time of the period for waiting – the expiry date. The less the risk is, the better the binary option is, isn’t it?
  • Binary range options are averagely popular, which means that in comparison to other exotic types of binaries, they can be found in many great brokers. If you want to find such a trading platform, which is both – providing range binaries and cool and safe environment, read our reviews and choose one that suits your preferences and has this type of trading on financial market.
  • The range options are very beneficial in moments, when the market is shaking. For example, if the USD is now quite rushing to reach a particular value and meanwhile, GBP has sudden drops, this means that the currency pair USD/GBP is not stable enough. On the other side, if you trade with range options by considering this type of a foreign currency, you can actually easily evaluate the level of the vitality of the asset and eventually to make a huge profit!
  • The expiry period of the range binaries is usually one day – 24 hours – which is a great condition for you to be aware of the time to wait for a result and the time to consider, when making a trade!

Range options are super great and lots of fun! So do not miss to try them in your favorite broker, as well!

Unleashing the Perception of Binary-Range Options

If the trade ends up inside the boundary, then you earn a profit provided the price remains inside the defined range at the time of expiry. There can also be a possibility that the price of the asset may remain between the boundaries. This means that the price should not touch either of the boundaries.

How To Use The Boundary Option

First, you need to define the range that you are eager to use. The best time to use the boundary option is when the market moves sideways and it is not trending. When the market is trending, then it becomes quite difficult to predict the floor or the ceiling value. If you want to figure out the range-boundary market, then the most important thing that you need to do is make use of an indicator that can help you identify the market trading direction. For example, you can use the Bollinger Band as an indicator to find out the range-boundary market.

The Bollinger band has three different bands. It has an upper, lower and middle band. The lower and the upper band can help you trace the price movement boundaries in the consolidating market. You can make a huge profit with a tight pre-determined boundary range. Let us now move to a real-life example related to boundary trading.

Example To Explain Boundary Trading

When you trade the boundary option, then you pinpoint the higher or lower limit within which the price of the selected asset will remain. Let us suppose you choose an EUR/USD currency pair. You predict that the price of the currency will remain in the range of 1.29626 and 1.29725. If the price of your chosen asset will remain in this range until the time of expiry, then your trade will end in the money. If the chosen asset touches the lower or upper boundary before the expiry, then your trade will end out of the money.

What is appreciable about range options is that you can exit a trade before the expiry. For example, you predicted that trade would remain in the range, but then the news is released that affects the price of your chosen asset. You realize that the price of the asset will no longer remain in the range.

What you should do in this situation is that you can sell off your asset quickly. This way you can reduce your risk and the chances of loss. If you want to increase your chances of winning the Binary range options, then there is a guideline that you should follow. You should not invest a huge amount when trading the boundary option. Ideally, you should invest in multiple boundaries at a time. This will help you to get more profit, and you will acquire more experience in boundary trading.

It is also important that you should be updated regarding the latest financial news if you are eager to win the boundary option. Remember the news can change the outcome of your trade. This is why you need to follow the proactive approach to avoid disappointment later on. Most traders prefer to trade outside the boundary. It is profitable in many cases, but again you need to monitor the market to make a decisive move.

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Range Trading Strategy

Binary Options Range Trading Strategy

Today, we shall examine another binary options trading strategy, which is exclusively used for trading the In/Out binary option, otherwise known as the boundary trades.

A boundary option is one trade option that gives four possible outcomes, depending on the broker that you are using. The trade outcomes are as follows:

a) Ends outside the range: Here the option is in the money if the price action is outside the selected price boundaries on expiry.

b) Ends inside the range: Here the option is in the money if the price action is inside the selected price range on expiry of the contract.

c) Stays between the price boundaries, in which case, the price action should at no time, breach any of the boundaries.

d) Goes outside the price boundaries: Where the trader needs the price action of the currency to breach the selected price boundaries just once to make a profit from the trade.

This gives the binary options trader ample opportunity to decide which trade is best for him at that point in time.

Trade Setup

The first step in using this trading strategy is to decide on the range to use. Range trading works best when the market is consolidating or in other words, when the market is trading sideways and not trending. In a trending market, rising or falling prices make it impossible to predict a price floor or ceiling, thus severely blunting the trader’s ability to profit from this trade.

The best way to detect a range-bound market is to use an indicator that shows you exactly in what direction the market is trading. One such indicator is the Bollinger band. Invented by John Bollinger, the Bollinger band has a lower band, a middle band and an upper band. The upper and lower bands show the confines of price movement in a consolidating market. Take a look at the chart below to see the illustration:

Looking at this daily chart of the EURUSD, we can clearly see that between June 10 and 1 st September, the market was range-trading. The Bollinger bands reveal the range of prices between the price floor and price ceiling.

Once you have something like this showing on your charts, use your horizontal line tool to trace two lines as shown. You now effectively have the 2 strike prices you need for your boundary trade.

Trade Types to Execute

You can now decide on which of the four boundary trade option contract types to purchase, and set relevant expiry dates. Most brokers will allow a minimum of 7 days for expiry, so make sure that the period of consolidation will at least, exceed that time frame. If you use a daily chart like we did above in this example, you will be able to get enough time to set an expiry.

Final Note

The boundary trade is not the only binary option contract that you can trade with this strategy. You can also use this strategy to trade a Touch/No Touch option contract. The bias here should be for a No Touch option contract, taking time to set the price barrier either to the upside or downside, well outside the range of prices as demarcated by your price floor and price ceiling. This way, you are sure that the price action of the underlying asset has no chance whatsoever of coming close to your price barriers.

If you need the price action to breach the boundaries, you can adjust your price barriers accordingly to make this happen.

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