The one touch binary options (also known as lock-in and touch digital) are usually the options with the highest payout. The predefined condition of the one touch binary option is whether or not the asset’s rate will reach (“touch”) a specific rate at any time until the expiration time of the option. Many new traders do not get it right and think that the rate has to remain at the rate or cross it in order to profit. At the second the rate gets to the one touch rate that was set when you bought the option, the option expires and you get your profits. You can buy an option which expires in an hour, get the rate to touch the set rate just 5 minutes after you entered the option, get your profits and buy another one touch option for the same expiration time for double the money. The example is to just clarify the condition and show how simple the condition is.
The one touch options do not just have big payout, the set rates that should be hit are usually set to be with lower probability rates when the option is opened. The one- touch binary options are usually used by big companies and financial institutions as a financial risk reduction tool. An airlines company, for example, just purchased very expensive fuel in large quantities to get a better price, now they have the fuel repository and they don’t want to lose money in the case that the fuel prices go down (because they have all that fuel that is now worth less). The airline company can buy one touch binary options on crude oil for a rate that is 5$ below the current rate. If the fuel prices remain in the price range they bought them, they spent the money to buy the one touch binary options as a way of insurance. If oil prices went down drastically by more than 5$ and influenced the fuel prices, the airlines company gets a very large payout for the one touch binary options and therefore does not lose the money. This was the explanation of why the one touch option was created and who uses it in the corporate world. For traders, who do not buy very large inventories of fuel or other tradable assets, the one touch only functions as a financial tool that generates very high payout.
One touch options chances are influenced by the market’s condition and the asset’s condition but the most important factor we need to take into consideration is the volatility. The more volatile an asset’s rate is, the higher chances of getting one touch binary options end in the money.
Although the condition of the one touch is very simple to understand (touch or no touch) it is still considered a binary option that is more suitable to the experienced traders. In order to understand the chance or a drastic price move that will hit the one touch rate, a trader needs to have the experience and the analysis tools to measure the chances of an “explosion” in the desired direction.
One touch binary options – advanced trading
In one touch we need to be able to predict two key factors: volatility and direction. It is not adequate to measure volatility if we do not know which way the explosion is going to be. You can choose your favorable method to predict the direction from support points, to averages manipulations, patterns isolation etc. For the volatility measurement we recommend using the ATR ( Average True Range ) which is a great volatility indicator. The ATR was created by J. Welles Wilder Jr. that is responsible for techniques like: Average True Range (ATR), Parabolic SAR, and Relative Strength Index (RSI). Your experience should tell you if the volatility level is adequate for the set touch rate.