Setting Expiration Times and Strike Prices Correctly in Binary Options Trading

Welcome to the world of Binary option trading. For beginners, understanding how to select the correct Expiry time and Strike price is crucial. These two parameters define when your trade ends and under what conditions you win or lose. Getting them wrong, even if your market prediction is correct, will result in a lost trade. This guide will walk you through the foundations, practical steps, and realistic expectations for mastering these settings.

Understanding the Core Concepts

Before diving into settings, you must grasp the fundamental components of a Binary option trade.

The Strike Price

The Strike price is the price level at which the option contract is based. Think of it as the finish line you set for the market.

When you buy a Call option, you predict the asset's price will be *above* the strike price at the Expiry time.
When you buy a Put option, you predict the asset's price will be *below* the strike price at the Expiry time.

In most binary options platforms, the strike price is automatically set to the current market price when you place the order. However, some platforms allow for slight adjustments, which directly influence whether your option ends up In-the-money (ITM) or Out-of-the-money (OTM).

In-the-Money (ITM) vs. Out-of-the-Money (OTM)

The relationship between the final price and the strike price determines the outcome.

ITM: If the option finishes on the correct side of the strike price, you receive the Payout.
OTM: If the option finishes on the wrong side of the strike price, you lose your initial investment (premium).

A trade that lands exactly on the strike price is usually considered a loss (or sometimes a refund, depending on the broker’s rules).

The Expiry Time

The Expiry time is the exact moment your trade concludes. This is arguably the most critical setting, as it must align perfectly with your analysis timeframe. If you predict a quick price bounce based on a short-term Candlestick pattern, setting a long expiry time will likely cause you to lose the trade as the market reverses.

Concept	Definition in Binary Options
Strike Price	The target price level at expiration.
Expiry Time	The exact moment the trade settles.
Payout	The return percentage you receive if ITM.

Step-by-Step: Setting Up Your Trade Parameters

The process of setting up an order involves analyzing the market, deciding on your entry, and then configuring the platform settings. This workflow is essential for disciplined trading, as detailed in Developing Disciplined Trading Habits and Mindset.

Step 1: Market Analysis and Timeframe Selection

Your analysis dictates the appropriate Expiry time. Are you trading based on a very short-term fluctuation (scalping) or a longer-term Trend reversal?

If you are using short-term indicators like the RSI or looking for immediate reactions to news, you might focus on 1-minute or 5-minute charts.
If you are using major technical levels like Support and resistance zones, you might look at 15-minute or hourly charts.

Step 2: Determining Entry Point and Direction

Based on your analysis, decide whether to execute a Call option (up) or a Put option (down).

Example: You see a strong bullish Candlestick pattern forming at a known support level. You decide to enter a Call option.

Step 3: Selecting the Expiry Time

This is where beginners often make mistakes. The expiry time must be long enough for your predicted move to materialize, but short enough to capture the immediate momentum.

If trading on a 1-minute chart, common expiries are 2 minutes or 5 minutes.
If trading on a 15-minute chart, expiries might be 30 minutes or 60 minutes.

A common beginner mistake is setting the expiry too short (e.g., 60 seconds) when the underlying analysis requires several minutes to play out. For more detailed guidance, review Expiration Time Strategies. Note that some platforms, like IQ Option, offer fixed expiries, while others might allow more granular settings (see also Temps d'expiration).

Step 4: Confirming the Strike Price (If Adjustable)

On platforms where the strike price is slightly adjustable (often called "Touch/No Touch" or customized expiry settings), you must decide how much buffer you need.

**Aggressive Entry (High Risk/High Reward):** Selecting a strike price very close to the current market price maximizes the potential Payout but requires extreme accuracy. If you predict a strong move, this might be viable.
**Conservative Entry (Lower Risk/Lower Reward):** Selecting a strike price further away from the current price gives the market more room to move before hitting your target. This often results in a slightly lower payout percentage because the probability of success is higher.

If the platform automatically sets the strike price to the current market price (common for standard high/low options), your focus shifts entirely to the Expiry time.

Step 5: Position Sizing and Risk Management

Before clicking "Buy," you must apply Risk management. Never risk more than a small percentage of your total account equity on a single trade. This is covered extensively in Essential Risk Management Techniques for Small Accounts.

Determine your investment amount based on your Position sizing rules (e.g., 1% or 2% of your account balance).

Expiry Time Selection: Matching Time to Volatility and Analysis

The correct Expiry time is intrinsically linked to the market's volatility and the type of analysis you employ.

Volatility Considerations

Volatility measures how quickly and dramatically prices change.

**High Volatility:** Prices move fast. You might use shorter expiries to capitalize on rapid swings, but you must be extremely precise with entry timing. Indicators like Bollinger Bands help visualize volatility.
**Low Volatility:** Prices move slowly. Longer expiries are generally safer, as sudden reversals are less likely to wipe out a small, slow move.

Common Analytical Timeframes and Corresponding Expiries

Analysis Tool/Chart Timeframe	Recommended Expiry Range
Short-term Patterns (e.g., 1-min chart, RSI crossovers)	2 to 5 minutes
Medium-term Reversals (e.g., 5-min chart, Support and resistance)	10 to 30 minutes
Trend Following (e.g., 15-min or 1-hour chart)	1 hour or longer

Invalidation Criteria for Expiry Time

If your trade is not moving in your favor with, say, 25% of the Expiry time remaining, you must accept the potential loss. Do not "average down" or try to place a second trade to cover the first loss immediately—this violates sound Developing Disciplined Trading Habits and Mindset.

**Mistake:** Entering a 5-minute trade based on a 1-minute chart signal, but the price stalls for 3 minutes before moving correctly. You likely lose because the momentum faded before expiration.

Strike Price Logic: ITM vs. OTM Buffers

The choice between aiming for a very tight win (deep ITM) or a wider win (shallow ITM) depends on your confidence in the signal strength.

Deep ITM vs. Shallow ITM

When the platform allows you to choose a strike price away from the current rate, you are essentially buying a buffer.

**Deep ITM (Aggressive):** You set the strike far away. This means the market must move significantly in your direction. The platform rewards this high certainty with a lower Payout percentage (sometimes as low as 60-70%).
**Shallow ITM (Conservative):** You set the strike very close to the current price. This means you only need a tiny movement to win. The platform rewards this low certainty with a higher Payout percentage (sometimes 85-95%).

Beginners often chase the highest Payout by setting the strike too close, failing to account for market noise or minor retracements.

Technical Analysis and Strike Placement

When using technical analysis, the strike price should ideally align with established levels.

**Reversal Trades:** If you are trading a bounce off a major Support and resistance level, set your strike price slightly *beyond* that level to give the bounce room to establish itself.
**Continuation Trades:** If you believe a Trend will continue after a brief consolidation, set your strike price just past the consolidation boundary.

If you are using predictive models like Elliott wave theory, the strike price should correlate with the expected end point of the current sub-wave.

The Role of Indicators in Strike Selection

Indicators help validate the *strength* of the move, which informs your strike buffer.

**Strong Momentum (e.g., MACD heavily crossing):** You might use a tighter strike (shallow ITM) because the momentum suggests a fast, prolonged move.
**Weak Momentum (e.g., RSI near 50):** You should use a wider strike (deeper ITM) or wait for a stronger signal, as the market might consolidate or reverse easily.

Remember that technical analysis tools like Bollinger Bands define normal price boundaries. Placing your strike price outside the expected band suggests you are betting on an extreme move, which carries higher risk.

Platform Workflow: Practical Execution on a Broker Interface

While specific interfaces vary (e.g., IQ Option vs. Pocket Option), the core workflow for setting parameters remains consistent. This process relies on the Core Components of a Binary Options Trading Platform.

General Order Entry Checklist

Select Asset (e.g., EUR/USD, Gold).
Select Expiry Time (e.g., 15 Minutes).
Select Option Type (Call or Put).
Set Investment Amount (Crucial for Position sizing).
Review Strike Price (If adjustable, confirm buffer).
Execute Trade.

Example: Entering a 5-Minute Call Trade

Assume you are analyzing the 1-minute chart and see a strong bullish signal indicating the price will rise over the next 5 minutes.

Parameter	Setting Chosen	Rationale
Asset	EUR/USD	Standard high-liquidity pair.
Direction	Call Option	Price predicted to rise.
Expiry Time	5 Minutes	Matches the short-term momentum observed.
Investment	$50	Adhering to 2% risk rule on a $2500 account.
Strike Price	Current Market Price	Platform default; relying on speed of move.

Handling Expiration Outcomes

If the trade finishes ITM, your $50 investment returns $50 plus the profit (e.g., $42.50 if the payout is 85%). If OTM, you lose the $50 premium.

A vital habit for improvement is maintaining a detailed Trading journal. Record *why* you chose that specific Expiry time and *where* the strike price was set relative to key technical levels.

Setting Realistic Expectations and Risk Limits

Binary options are high-risk instruments. Setting parameters correctly minimizes *execution* errors, but it does not guarantee profit.

Risk Per Trade and Daily Limits

Proper Risk management requires predefined limits *before* you start trading.

**Risk Per Trade:** As mentioned, typically 1% to 3% of capital. If you invest $100 on a $1000 account, that is 10% risk—too high for a beginner. Stick to the lower end (see Essential Risk Management Techniques for Small Accounts).
**Daily Loss Limit:** Decide the maximum amount you are willing to lose in one day (e.g., 5% of your account). If you hit this limit, stop trading immediately, regardless of how tempting the next setup looks. This prevents emotional trading, a major pitfall detailed in Developing Disciplined Trading Habits and Mindset.

The Illusion of Precision

While you select precise times and prices, the market itself is inherently random in the very short term. Do not expect every trade to be perfect.

If you set a 2-minute expiry, and the price hits your target exactly 1 minute and 50 seconds in, but then reverses sharply to finish OTM at the 2-minute mark, that is a valid loss based on your parameters. You must accept the outcome defined by the Expiry time.

If you find yourself constantly adjusting the expiry time mid-trade (which is impossible on most fixed-expiry platforms anyway), it means your initial analysis was flawed, or you are suffering from analysis paralysis.

Platform Specific Considerations (Example: IQ Option)

Brokers like IQ Option often simplify the strike price selection for standard High/Low options, focusing the trader primarily on the Expiry time and investment size.

**Demo Account Usage:** Always test your chosen expiry/strike logic on a demo account first. See how a 2-minute expiry behaves versus a 5-minute expiry on the same signal.
**Asset Availability and Payouts:** Check the Payout structure. If the payout for Gold is 80% and for USD/JPY is 92%, you might be tempted to trade USD/JPY simply for the higher return, even if your analysis is weaker there. Stick to assets where your analysis is strongest, irrespective of minor payout differences.

Feature	Beginner Focus Area
Demo Account	Practice matching chart timeframe to Expiry Time.
Payout Percentage	Do not select trades solely based on the highest payout.
KYC/Compliance	Ensure the platform is compliant in your region before depositing funds.

Understanding how the platform handles the final price relative to the strike is crucial. If a broker offers "Early Exit," this is technically adjusting your effective Strike price mid-trade, but it usually locks in a partial loss or a very small win. For beginners, avoid early exits and stick to the original plan unless you are trading very large positions where capital preservation is paramount.

The correct setting of Expiry time and Strike price transforms abstract market analysis into a concrete, measurable trade. Precision in these settings, backed by sound Risk management, is the foundation upon which sustainable binary options trading is built.

Recommended Binary Options Platforms

Platform	Why beginners choose it	Register / Offer
IQ Option	Simple interface, popular asset list, quick order entry	IQ Option Registration
Pocket Option	Fast execution, tournaments, multiple expiration choices	Pocket Option Registration

Join Our Community

Subscribe to our Telegram channel @copytradingall for analytics, free signals, and much more!

Setting Expiration Times and Strike Prices Correctly

Contents