One Touch Strategy

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  1. One Touch Strategy: A Beginner's Guide

The One Touch strategy is a popular and relatively simple binary options trading strategy, often favored by beginners due to its clear and defined profit target. However, despite its simplicity, understanding the nuances and risk management is crucial for successful implementation. This article provides a comprehensive guide to the One Touch strategy, covering its mechanics, advantages, disadvantages, key indicators, risk management techniques, and practical examples. This guide assumes a basic understanding of Binary Options trading.

What is the One Touch Strategy?

The One Touch strategy, as the name suggests, is based on the prediction whether the price of an asset will *touch* a specific predetermined price level (the "touch barrier") before the option's expiration time. Unlike traditional high/low options which require the price to be *above or below* the strike price at expiration, One Touch options only require a fleeting touch of the barrier. This makes them potentially more profitable, but also inherently riskier.

Here's a breakdown of how it works:

  • **The Asset:** You select the underlying asset you want to trade, such as currency pairs (e.g., EUR/USD, GBP/JPY), indices (e.g., S&P 500, NASDAQ), or commodities (e.g., Gold, Oil).
  • **The Touch Barrier:** The broker sets a barrier price, either above (for a "Touch Up" option) or below (for a "Touch Down" option) the current market price. This barrier is usually significantly away from the current price.
  • **The Expiration Time:** You choose the expiration time for the option. Shorter expiration times offer higher potential payouts but require more accurate predictions. Longer expiration times offer lower payouts but are less sensitive to short-term price fluctuations.
  • **The Payout:** If the price of the asset touches the barrier before the expiration time, you receive a predetermined payout (typically 70-90%). If the price *does not* touch the barrier, you lose your initial investment.
  • **The Cost:** The cost of a One Touch option is usually higher than standard binary options due to the higher payout potential. This represents the premium you pay for the increased risk.

Advantages of the One Touch Strategy

  • **High Potential Payouts:** One Touch options offer significantly higher payouts compared to standard high/low options, making them attractive for traders seeking substantial profits.
  • **Simplicity:** The core concept is straightforward: predict whether the price will touch a barrier. This makes it easier to understand and implement, especially for beginners.
  • **Flexibility:** One Touch options are available on a wide range of assets and timeframes, providing traders with flexibility in their trading choices.
  • **Quick Results:** Depending on the chosen expiration time, results can be known relatively quickly, allowing for rapid trading cycles. This is particularly appealing for scalpers.
  • **Defined Risk:** Like all binary options, the maximum loss is limited to the initial investment.

Disadvantages of the One Touch Strategy

  • **High Risk:** The probability of the price touching the barrier is often lower than the probability of it staying within a certain range, making One Touch options inherently riskier.
  • **Higher Cost:** The premium paid for One Touch options is higher, reducing the potential profit margin compared to standard options if the trade is successful.
  • **Volatility Dependence:** The strategy is heavily reliant on market volatility. Low volatility environments make it less likely for the price to reach the barrier.
  • **Broker Manipulation Concerns:** While less prevalent now, past concerns about broker manipulation of barrier prices exist, so choosing a reputable broker is critical.
  • **Psychological Pressure:** The all-or-nothing nature of binary options can create psychological pressure, leading to impulsive decisions.

Key Indicators for the One Touch Strategy

While the One Touch strategy can be used with minimal technical analysis, incorporating indicators can significantly improve the probability of success. Here are some of the most useful indicators:

  • **Bollinger Bands:** Bollinger Bands can help identify potential breakout points. A price moving towards the upper band suggests a potential "Touch Up" opportunity, while a move towards the lower band suggests a potential "Touch Down" opportunity. Consider the bandwidth – wider bands indicate higher volatility, increasing the chances of a touch. [1]
  • **Relative Strength Index (RSI):** RSI is a momentum oscillator that can help identify overbought and oversold conditions. An RSI above 70 suggests the asset is overbought and may be poised for a pullback (potential "Touch Down"), while an RSI below 30 suggests the asset is oversold and may be due for a rally (potential "Touch Up"). [2]
  • **Moving Averages:** Moving Averages can help identify the overall trend. A price crossing above a moving average suggests an uptrend (potential "Touch Up"), while a price crossing below a moving average suggests a downtrend (potential "Touch Down"). Consider using multiple moving averages (e.g., 50-day and 200-day) to confirm the trend. [3]
  • **Fibonacci Retracement Levels:** Fibonacci Retracement levels can identify potential support and resistance levels. The barrier price often aligns with a significant Fibonacci level. [4]
  • **Pivot Points:** Pivot Points are calculated based on the previous day's high, low, and close prices and can act as support and resistance levels. The barrier price may be set near a pivot point. [5]
  • **Average True Range (ATR):** ATR measures market volatility. A high ATR indicates high volatility, making One Touch options more attractive. [6]
  • **Ichimoku Cloud:** Ichimoku Cloud provides a comprehensive view of support and resistance, momentum, and trend direction. [7]
  • **MACD (Moving Average Convergence Divergence):** MACD is a trend-following momentum indicator that shows the relationship between two moving averages of prices. [8]
  • **Stochastic Oscillator:** Stochastic Oscillator compares a security’s closing price to its price range over a given period. [9]
  • **Volume:** Analyzing trading volume can confirm the strength of a trend. Increasing volume during a price move suggests a strong trend, increasing the likelihood of the price touching the barrier. [10]

Risk Management Techniques

Effective risk management is paramount when trading One Touch options. Here are some strategies to mitigate risk:

  • **Capital Allocation:** Never risk more than 1-2% of your trading capital on a single trade.
  • **Demo Account Practice:** Before trading with real money, thoroughly practice the strategy on a Demo Account to familiarize yourself with the platform and refine your approach.
  • **Choose Reputable Brokers:** Select brokers with a strong regulatory reputation and transparent pricing. Broker Selection is a crucial step.
  • **Volatility Assessment:** Carefully assess market volatility before entering a trade. Avoid trading One Touch options in low volatility environments.
  • **Barrier Distance:** Consider the distance between the current price and the barrier. A smaller distance increases the probability of a touch but also increases the cost of the option.
  • **Expiration Time:** Choose an expiration time that aligns with your trading style and the volatility of the asset. Shorter expiration times are riskier but offer higher payouts.
  • **Avoid Overtrading:** Resist the temptation to trade excessively. Stick to your trading plan and avoid impulsive decisions.
  • **Diversification:** Don't put all your eggs in one basket. Diversify your trades across different assets and strategies.
  • **Stop-Loss (where available):** Some brokers offer a "partial payout" feature which acts like a stop-loss; utilize this if possible.
  • **News Awareness:** Be aware of upcoming economic news releases that could significantly impact the price of the asset. [11](https://www.forexfactory.com/) is a good resource.

Practical Example: Trading EUR/USD with the One Touch Strategy

Let's say the EUR/USD is currently trading at 1.1000. A broker offers a "Touch Up" option with a barrier price of 1.1100 and an expiration time of 1 hour, with a payout of 80%.

1. **Analysis:** You analyze the EUR/USD using Bollinger Bands and RSI. The Bollinger Bands are widening, indicating increasing volatility. The RSI is currently at 45, suggesting the asset is not overbought or oversold. Recent price action shows upward momentum. 2. **Decision:** Based on the analysis, you believe the EUR/USD has a good chance of reaching 1.1100 within the next hour. 3. **Trade Entry:** You purchase the "Touch Up" option for a cost of $50. 4. **Outcome:** Within 45 minutes, the EUR/USD price rises to 1.1100, touching the barrier. Your option is triggered, and you receive a payout of $40 (80% of $50). Your net profit is $40 - $50 = -$10. (Note: This example shows a loss, highlighting the risks involved).

    • Another Scenario:** If the EUR/USD *didn't* reach 1.1100 within the hour, you would lose your initial investment of $50.

Advanced Considerations

  • **Scalping with One Touch:** Experienced traders can employ scalping techniques with One Touch options, taking advantage of short-term price fluctuations. This requires quick decision-making and tight risk management.
  • **Combining Strategies:** The One Touch strategy can be combined with other trading strategies, such as trend following or breakout trading, to improve the probability of success.
  • **Correlation Trading:** Trading correlated assets simultaneously can help mitigate risk. For example, if you are trading a "Touch Up" option on EUR/USD, you might consider a "Touch Down" option on USD/CHF.
  • **Algorithmic Trading:** Developing automated trading algorithms based on the One Touch strategy can help execute trades more efficiently and consistently. [12](https://www.mql5.com/) provides resources for algorithmic trading.

Resources for Further Learning



Technical Analysis Binary Options Trading Risk Management Bollinger Bands RSI Moving Averages Fibonacci Retracement Pivot Points ATR Ichimoku Cloud Demo Account Broker Selection

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