When trading with binary options, your expiry time is very important. Choosing the right expiry is the difference between profit and loss. Let’s look at some factors to consider before you decide what expiry is right for you.
The Charts
Study your binary options charts, measuring every rally and every pullback. Keep your information in a table format, so it is easy to glance at and read. Consistently chart the information you learn, such as the average length of a short-term rally in a bear market and how many rallies to expect in the long-term market. Then, when you receive a strong signal on an hourly chart that the S&P 500 is moving up, you know the average length of the rally and can choose an expiry date accordingly.
Time Frame
Charting a time frame is basically looking at price trends. The longer the time frame, the more signals emerge. Most traders look at multiple time frames; weekly, daily, and hourly are the most common. Then, track the trends to see how your asset moves. Depending on the chart you look at depends on the expiry you choose. For example, if you base your time frame on the one-minute charts, choose an expiry between 60 seconds and five minutes.
News and the Market
News events — expected or unexpected — often influence the stock market. Good or bad, a late breaking story might send the markets in the opposite direction from where your signals show it is going. Keep up with current news, especially in the area of the assets you are trading. Major economic events, earnings reports, and politics all play a significant role in whether your asset goes up or down.
Convergence and Divergence
A convergence is when both price action and your indicators agree. Any time you get this strong type of signal, use the short expiry times because a strong signal means action occurs soon. Divergence is the opposite — price action and indicators do not agree. Be very cautious then as reversals are common. Sometimes, choosing not to trade during a divergence is the smartest move.
Easy and Hard
Considered the easiest form of trading, binary options aren’t exactly simple. The term easy refers to no margin accounts or margin calls to worry about. And the risk is less for a binary options account compared to a traditional account that’s open to unlimited losses. But binary options are not simple. Lots of time and research goes into studying the market to gain an understanding and develop a system. The most difficult part of the system is selecting the expiry, and that takes research.
The best way to enter the binary options market is choosing one or two assets at the most. Familiarize yourself with the charts of the assets and the time frame to trade in. Keep up with trends and the news, taking all market factors into consideration. After you have a chart developed and you see the proper signals, begin by placing bids and choosing expiry times. Soon, the entire process seems easy, and you reach a comfort level for trading binary options.
