Choosing The Right Binary Options Expiry

The Hardest Part Of Trading Binary Options

Don’t get me wrong, binary options are way easier than trading most other forms of financial instruments. And I’m not talking about the ease of access either. There are many reasons why trading binary is attracting more and more traders, and pulling more and more traders away from other disciplines. The very first thing that makes binary better is account size. You don’t have to have a margin account, and there are no margin calls. The second thing that makes binary options better is risk. There is infinitely less risk to a simple yes or no trade than to one that opens your account to unlimited losses the way that spot positions do. This is why so many forex and commodity speculators have switched. If I haven’t yet convinced you that binary is easier than other forms of trading let me mention delta, theta and implied volatility and I will know that equity traders just got a shiver down their back. So, I’ve established that binary is much easier to trade than other forms of trading but that does not make it easy to do. You still have understand the market, work with a strategy, employ a system and use good judgment. If there is one thing that I can say as definitively being the hardest part of trading binary is choosing your expiry.

Caught between a rock and hard place.

Caught between a rock and hard place.

How To Choose The Right Broker For Your Strategy

This is of course assuming you have found a good broker to trade with, have learned some technical analysis and are disciplined enough to trade responsibly. I have found that no matter which broker, or which platform I trade on that there is very rarely an expiry exactly when I want. This not a fault of the brokers because they, as a whole, try very hard to provide the options and expiry demanded by the market, namely us traders. The very first step in choosing the right expiry is to understand your strategy and how you are trading. If you are a swing trader like me you will definitely need a broker that has at least end of the week expiry if not end of next week, or end of month, or 30 days, or a combination of these. Not all brokers have them. Most brokers are limited to shorter term expiries because binary options are intended for quick, day trader and option scalper, types of trades.

The next step in choosing the right expiry period comes down to the platform and the broker. The first difference in expiry types is long term and short as in end of day versus end of month expiry. The next difference in expiry types is how expiry is determined relative to time of purchase. Is expiry set at some future time or date or is it a set time from the time of purchase. Let me explain. An end of month expiry is 30 days, at first. And then it is 29 days, and then 20 days, and then 5 days and then one hour all the way down until the time expiry. The amount of expiry depends on how much of that time is left when you buy into your position. If I buy and end of month position on the 1st, I have roughly 30 days. If I buy it on the 25th I have 5 or 6 days. I can’t tell you how many times I screwed myself up with that mistake. This is also true of short term expiry. An end of the day expiry has 6 or 7 hours of expiry at the start of trading, but less and less as the day wears on so it is important to keep this in mind.

Expiry set from time of purchase is much better in my opinion but choosing your broker based on expiry comes down to a variety of factors, not just this one. This is how 1 hour, 60 second, 1 week, 30 day and 1 month options are set expire, along with many other choices (depending on the broker). This means that the options expires a set amount of time after the option is purchased. I’m sure the most well known example is 60 second options, options that expire 60 seconds from time of purchase. I like this better because if I want to trade 30 days I can, and am not hindered by the calendar. It just provides a lot more flexibility.

Choosing The Right Expiry For Your Strategy

Understanding your strategy is what ties all of this together. Your strategy dictates what kind of expiry you will need. If you are trading day signals with expiry before the end of the day you obviously don’t longer term expiry and vice versa. However, both kinds of traders can use the same tricks to pinpoint expiry times. They do it by measuring their charts. This is one of the most useful tips I can give to a technician. Go back and measure your charts, measure every rally, every decline, every correction, every trading range until you get a feeling for how your chosen asset moves. It doesn’t matter if you are using 1 day charts, 1 week charts, 5 year charts, hourly, daily or weekly candles. In fact, I suggest measuring your chart in different time frames. Then go back and find all the signals you would want to trade on and measure them. Measure how many candlesticks it takes for the asset to move into the money once your signal has fires. Then average them all together. Then use that figure to pick your expiry, just make sure it can be employed on the platform you are trading. Here are a couple of links to more in depth articles I have written about chart patterns and choosing the right expiry.

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