Trading touch / no touch options gives traders the chance to profit from predictions they make not only regarding the direction of an asset’s price, but also price volatility.
In this article, Trading Touch / No Touch, we will present a strategy for no touch options based on simple moving averages (SMA). In certain conditions, this strategy can yield a very high percentage of winning trades.
In order to win a touch and no touch option, traders must predict whether an asset’s price will reach (“touch”) a predefined market price or not during the running time of the option.
If you would like to know more about how touch and no touch options work, you will find plenty of information elsewhere on this site.
A reliable and easy-to-understand way to trade no touch options is to use resistance and support levels to guide your decision making. In cases where the price of an asset needs to break through a longstanding resistance or support level to attain the price determined by the no touch option, this is unlikely to happen. You can, in other words, invest in that prediction. By following a strategy like this, you give yourself a great chance of winning a high percentage of trades.
The catch here, which experienced traders will have noticed already, is that chances to trade no touch options with longstanding resistance or support levels do not come along very often. In addition, you are required to put in a considerable degree of effort in order to establish such price levels. As a consequence, this is a strategy that might suit traders who are very risk-averse, but would simply not yield enough usable signals for the majority of traders.
A different strategy that will generate more, but still reliable, signals is to use moving averages. Moving averages are used to display the average price of an asset as a line across a price chart. When the moving average line is above the current price it constitutes a resistance level, when it is beneath the current price it becomes a support level.
The majority of trading software will be able to put moving averages directly on your price chart. This makes using them an easier option than relying on support or resistance levels.
You make money with this knowledge by combining several moving averages with different time frames. In situations where they reach similar price levels they together represent very convincing resistance or support levels. When the price of the asset you are monitoring approaches that level, you will eventually find a no touch option with your broker that, in order to fail, will need the price to exceed the resistance level or drop beneath the support level established by the combined moving averages.
You investing in this is not happening by placing your money in a no touch option. This is as close to a sure thing as you will find in the binary options market.
When you combine several moving averages you can choose averages with as many or as few periods as you wish. Many traders opt for a combination along the lines of a 50-period, a 100-period and a 200-period moving averages. Remember that you also need to adjust your chart’s time frame accordingly.
The price of the asset will be closer to moving averages with small time frames. This means that averages with small time frames will generate a higher number of signals. For this strategy, many traders use a 15 minute time frame where each candlestick represents 15 minutes of trading. It is of crucial importance that you also choose a binary option with an expiration time that matches your timeframe.
When it comes to timing, you might be well advised to follow this strategy when there is a low trading volume. During such spells there tends to be less volatility. In other words, moving averages that represent different time periods should be closer to one another, thereby creating more signals.
Times with low trading volumes will in the case of currency pairs be the time of day when the main markets for both of them are closed for business. When it comes to stocks, they will often be traded in low volume towards the end of the trading day.