Binary Options Touch Strategy

Binary Options Touch Strategy

Submitted by adil on Thu, 02/13/2014 - 10:00

Fibonacci retracements are one of the most popular tools used to optimize Forex market. The main purpose of using this strategy is to identify price targets that price action is very likely to breach. In fact, the Fibonacci retracements enable traders to make right choice as far as selecting Touch option in the Touch/Not Touch trade is concerned.

Please keep in mind that following lines only explain the Touch part of the Touch/No Touch strategy and it has nothing to do with No Touch portion which is a high risk and high yield option contract as compared to the Touch trade.

 Trade Types:

As in the case of any other strategy, traders have to identify right types of trades for this particular binary options strategy. In this regard, the Touch/Not Touch trade contract is the most suitable trade type for using this strategy. This trade type is easily available on all the major binary options platforms.

Rules to Follow:

Following are some rules that traders have to follow in order to trade this strategy successfully.

• The asset must fall in an area of retracement after following a strong trend.
• Traders must know the trend direction as well as subsequent retracements.
• Traders have to apply Fibonacci retracements to both price extremes. However, this will also depend upon the trend direction and following retracements.

How to Setup the Trade?

Traders can apply Fibonacci indicator as follows after identifying the trend direction and subsequent retracements in which the trade is in.

• Uptrend with Downside Retracements:

In the case of uptrend and downward retracements, you need to trace the tool from swing low to swing high on the chart. Now apply the Stochastics Indicator and when it displays an oversold value, pick up the Fibonacci retracements. At this level, the retracements will be at maximum and the price will expectedly revert to the previous trend’s direction. In this regard, you need to select that price as the strike price for the trade that corresponds to Fibonacci level immediately above the maximum retracement level. Afterwards, simply execute the trade on whichever binary option platform you are using.

• Downtrend with Upside Retracement Bounce:

In contrast to uptrend, traders need to locate the tool for swing high to swing low in case of downtrend with upside retracement bounce. You need to pick up the Fibonacci levels at the point where the Stochastics indicator identifies an overbought value. This level will become the retracement maximum making the price to move in the same direction of previous trend.  The rest of the procedure is same as in the case of uptrend that is traders select the price corresponding to the Fibonacci levels located immediately below the maximum retracement level as the strike price for Touch trade.

Setting Expiry Times:

For Touch trade, the trade will have more chances to succeed if it lasts for a longer period of time. Therefore, the ideal expiry time for this type of trade should at least be 7 days.

Risk Management Techniques:

A trader should never expose more than 5% of his account to any trade. For instance, your account size should be at least $750 if the minimum trade amount of your broker is $25. This is to provide $250 as supplementary capital and $500 as trade capital in case your first trade fails.