You have probably heard about day trading as it pertains to forex and other forms of financial trading, but this is probably the first time you are hearing of binary options day trading. The concept of day trading is simple: open a trade position and close it within the same trading day. So when we speak of binary options day trading, it simply means the practice of opening and closing a binary options contract position within the same trading day.
All binary options contracts have expiry dates and times, and unless the trader is using a platform that offers a variable option expiry, the conventional binary options contract has a fixed expiry. Once the expiry has been set and the trade is active, the trader cannot close the position manually the way it is done in other financial markets. As such, a binary options day trading contract will involve choosing an expiry that will cause the trade to terminate within the same trading day.
The choice of trading platform will determine what kind of expiry date/time is used in setting a binary options day trading contract. Brokers that use the SpotOption white-label platform (Dragon Options, iOption, TraderRush, etc) have default intraday expiry times for their classical Call/Put option, and also allow traders to choose intraday expiries using the OptionBuilder trade type. There is also the 60 second option and the High Yield Touch option that also permits the trader to perform a binary options day trade by setting an intraday expiry time. So it is pretty easy to use intraday expiry times with the SpotOption white-label platform. If the trader is using a Tech Financials white-label broker such as AnyOption or OptionFair, it will allow the broker more limited intraday expiry options. The trader will only be able to use intraday expiries for the High/Low trade or the High Yield Boundary options. Other brokers who use more customized solutions such as BetonMarkets will only permit intraday expiry times using their Rise/Fall or High/Low options, and even at that, only on certain asset classes. So it is very important for the trader to know which platform he is using so as to time his trades to expire within the same trading day.
From this information, it is clear that binary options day trading contracts tend to be more speculative and puts the trader under a greater amount of pressure for the trade to perform. Therefore, only strategies that can deliver profitable targets for the trade within a maximum time frame of 24 hours should be used.
Generally speaking, the following assets can be used for binary options day trading:
- Stock indices
- Commodities (limited)
Strategies for Binary Options Day Trading
If I were to do a binary options day trade, what strategy would I use? This is the question that every intending binary options day trader should ask himself or herself. Definitely, the best bet would be to establish a strategy that can tell if an asset will be higher or lower than a certain strike price within a 24-hour time frame. Here are some possible ideas:
- One way to go would be to create an indicator based on a trade strategy that can be attached to an interactive chart. Such a chart would be the 15-minute, one hour or 4 hour time frame. Such an indicator would be able to give a clear buy/sell signal to the trader on the asset, which can then be implemented on the binary options platform.
- Chart patterns based on the lower time frame charts can be used.
- Candlestick patterns that are derived from the lower time frame charts can also be used.
Utilizing the lower time frame charts would ensure that the trade outcome would unravel within a maximum of 24 hours.