Follow Touch Option

Follow Touch Option: A Beginner's Guide

The "Follow Touch" option is a relatively recent addition to the binary options landscape, gaining popularity for its potential for high payouts and unique trading dynamics. It differs significantly from traditional high/low or call/put options, requiring a different understanding of market behavior and strategy. This article aims to provide a comprehensive guide to Follow Touch options, suitable for beginners, covering its mechanics, strategies, risk management, and how it compares to other option types.

What is a Follow Touch Option?

A Follow Touch option, also sometimes referred to as "One Touch" or "Barrier Option" (though these terms can overlap with other option types), is a binary option that pays out if the asset price *touches* a specified price level (the "barrier" or "touch price") *at any point* during the option's lifetime. Crucially, the price doesn’t need to close *at* or *above/below* the barrier; a momentary touch is sufficient to trigger a payout. The "Follow Touch" name emphasizes that the price needs to *follow* through and touch the barrier.

Unlike a standard high/low option which requires the price to be above or below a certain level at expiry, or a call/put option which requires a directional movement, a Follow Touch option focuses solely on whether the price reaches a predetermined level. This makes it a volatility play, meaning its profitability is heavily influenced by the degree of price fluctuation.

The payout percentages for Follow Touch options are typically higher than those for traditional binary options, reflecting the increased risk involved. Payouts can range from 70% to 95%, depending on the broker, the underlying asset, and the time to expiry. However, the risk of losing the initial investment is also significantly higher.

How Does it Work?

Let's illustrate with an example:

You believe that EUR/USD, currently trading at 1.0800, will experience significant volatility during the next 15 minutes. You decide to purchase a Follow Touch "Call" option with a barrier price of 1.0850. This means you predict the price *will* touch 1.0850 before the 15-minute expiry.

**Scenario 1 (Successful):** During the 15 minutes, the price of EUR/USD rises to 1.0855 (even momentarily) and then falls back down. The option is triggered, and you receive the payout (e.g., 80% of your investment). It doesn't matter if the price is below 1.0850 at expiry.
**Scenario 2 (Unsuccessful):** The price of EUR/USD fluctuates between 1.0790 and 1.0845 throughout the 15 minutes, never reaching 1.0850. The option expires out-of-the-money, and you lose your initial investment.

You can also buy "Put" Follow Touch options, predicting the price will touch a barrier *below* the current price. For example, if EUR/USD is at 1.0800 and you buy a Follow Touch "Put" with a barrier of 1.0750, you profit if the price touches 1.0750 or lower before expiry.

Key Differences from Other Binary Options

Understanding how Follow Touch options differ from other types is critical:

**High/Low Options:** High/Low options require the price to be *above* (High) or *below* (Low) a certain level *at the expiry time*. Follow Touch only requires a *touch* of the barrier before expiry.
**Call/Put Options:** Call/Put options require the price to move in a specific direction (up for Call, down for Put) *by the expiry time*. Follow Touch doesn't care about the direction, only if the barrier is hit.
**Touch/No Touch Options:** While similar, Touch/No Touch options typically have a longer expiry time and focus on whether the price touches the barrier *at any point during the entire option period*. Follow Touch often has shorter expiry times and emphasizes a faster touch. Touch/No Touch Option
**Range Bound Options:** Range bound options require the price to stay within or break out of a specific range at expiry. Follow Touch only needs a single touch. Range Bound Option

Strategies for Trading Follow Touch Options

Several strategies can be employed when trading Follow Touch options. These strategies should be combined with robust risk management techniques.

**Volatility Breakout:** This is the most common strategy. Identify assets expected to experience a significant price swing. Look for assets nearing key support and resistance levels. If you anticipate a breakout, purchase a Follow Touch option with a barrier slightly above the resistance (for Calls) or below the support (for Puts). Consider using the Bollinger Bands indicator to identify potential volatility breakouts.
**News Trading:** Major economic news releases (e.g., interest rate decisions, employment reports) often cause significant price fluctuations. Trade Follow Touch options *immediately* after the news release, anticipating a quick touch of a barrier. However, be aware of potential slippage and volatility spikes.
**Trend Continuation:** When a strong trend is established, use Follow Touch options to profit from continued momentum. If the price is trending upwards, buy a Call option with a barrier slightly above the current price. If the price is trending downwards, buy a Put option with a barrier slightly below the current price. Use the Moving Average Convergence Divergence (MACD) indicator to confirm trend direction and strength.
**Range Trading (with Caution):** Identify assets trading within a defined range. If the price approaches the upper boundary of the range, consider a Follow Touch "Put" option with a barrier slightly below the range. If the price approaches the lower boundary, consider a Follow Touch "Call" option with a barrier slightly above the range. This strategy is riskier, as range breakouts can easily invalidate the trade. Fibonacci retracement can help identify potential range boundaries.
**Pin Bar Strategy:** Identify Pin Bar candlestick patterns. These patterns often signal potential reversals. If a bullish Pin Bar forms near support, consider a Call Follow Touch option. If a bearish Pin Bar forms near resistance, consider a Put Follow Touch option.

Technical Analysis Tools for Follow Touch Options

Utilizing technical analysis tools can significantly improve your success rate when trading Follow Touch options.

**Support and Resistance Levels:** Identifying key support and resistance levels is crucial for setting appropriate barrier prices. Pivot Points can be helpful in identifying these levels.
**Trend Lines:** Trend lines help identify the direction of the trend and potential breakout points.
**Volatility Indicators:** Indicators like Average True Range (ATR) and Bollinger Bands measure price volatility and can help you choose assets with sufficient movement for Follow Touch options.
**Candlestick Patterns:** Recognizing candlestick patterns like Doji, Engulfing Patterns, and Hammer can provide clues about potential price reversals and breakouts.
**Oscillators:** Relative Strength Index (RSI) and Stochastic Oscillator can help identify overbought and oversold conditions, suggesting potential for a price reversal and barrier touch.
**Volume Analysis:** Increasing volume often accompanies price breakouts. Pay attention to volume when anticipating a barrier touch. On Balance Volume (OBV) can be valuable.

Risk Management for Follow Touch Options

Follow Touch options are inherently risky. Employing robust risk management strategies is paramount.

**Small Investment Size:** Never risk more than 1-2% of your trading capital on a single Follow Touch option.
**Expiry Time:** Choose appropriate expiry times. Shorter expiry times offer higher potential payouts but are more difficult to predict. Longer expiry times offer more time for the barrier to be touched but come with lower payouts. Consider the asset's typical volatility when selecting an expiry time.
**Barrier Placement:** Carefully consider the barrier price. Setting a barrier too close to the current price increases the probability of the option expiring in-the-money but reduces the potential payout. Setting a barrier too far away decreases the probability of success.
**Diversification:** Don't put all your eggs in one basket. Diversify your trades across different assets and option types.
**Avoid Overtrading:** Don't trade Follow Touch options impulsively. Stick to your trading plan and only enter trades that meet your criteria.
**Understand Correlation:** Be mindful of correlated assets. Trading multiple Follow Touch options on correlated assets can amplify your risk.
**Stop-Loss (Indirect):** While a direct stop-loss is not available with binary options, you can manage risk by limiting the number of consecutive trades you take if you experience losses.
**Practice with a Demo Account:** Before trading with real money, practice with a demo account to familiarize yourself with the platform and test your strategies. Demo Account Trading

Follow Touch vs. Other High-Payout Options

Several other option types offer high payouts, but they differ from Follow Touch in key ways.

**Ladder Options:** Ladder options offer increasing payouts at successively higher (for Calls) or lower (for Puts) price levels. They are less reliant on a single touch and more on reaching a specific level. Ladder Option
**One Touch Options (General):** As mentioned earlier, “One Touch” is sometimes used as a general term. Follow Touch often implies a quicker, more immediate touch expectation.
**Binary Turbo Options:** These offer even higher leverage and payouts but are extremely risky and often have very short expiry times. Binary Turbo Option

Follow Touch offers a balance between the simplicity of traditional binary options and the higher payout potential of more complex options.

Choosing a Broker

When selecting a broker to trade Follow Touch options, consider the following:

**Regulation:** Ensure the broker is regulated by a reputable financial authority (e.g., CySEC, FCA). Binary Options Regulation
**Payout Percentages:** Compare payout percentages across different brokers.
**Asset Selection:** Choose a broker that offers a wide range of assets.
**Platform Usability:** Select a platform that is user-friendly and reliable.
**Customer Support:** Ensure the broker provides responsive and helpful customer support.
**Deposit and Withdrawal Options:** Check the available deposit and withdrawal methods.

Final Thoughts

Follow Touch options can be a profitable trading instrument when approached with knowledge, discipline, and robust risk management. Understanding its mechanics, employing appropriate strategies, and utilizing technical analysis tools are crucial for success. Remember that binary options trading involves significant risk, and it's possible to lose your entire investment. Always trade responsibly and only invest what you can afford to lose. Continuous learning and adaptation are key to navigating the dynamic world of binary options. Don't rely solely on signals; develop your own understanding of the market. Binary Options Trading

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