Short Term Expiry Binary Options

1. Short Term Expiry Binary Options: A Beginner's Guide

1. 1. Introduction

Binary options, in general, are financial instruments that offer a fixed payout if a specific condition is met within a predetermined timeframe. Binary option Short term expiry binary options, also known as 60-second options, turbo options, or intraday options, represent a particularly fast-paced and high-frequency trading style within this broader category. These options expire in as little as 60 seconds, though expiry times can range from a few minutes up to a maximum of, typically, 24 hours. This article aims to provide a comprehensive understanding of short term expiry binary options, covering their mechanics, risks, strategies, and essential considerations for beginner traders. Understanding these options requires a solid grasp of underlying asset price movements and a disciplined approach to risk management. Before embarking on trading, it is crucial to thoroughly understand the inherent risks and potential rewards.

1. 1. How Short Term Expiry Binary Options Work

The basic principle of a binary option remains consistent regardless of the expiry time. A trader predicts whether the price of an underlying asset (such as stocks, commodities, currencies, or indices) will be *above* or *below* a specific price (the strike price) at the moment of expiry.

• **Call Option (Above):** The trader believes the asset price will be higher than the strike price at expiry.
• **Put Option (Below):** The trader believes the asset price will be lower than the strike price at expiry.

With short term expiry options, this prediction needs to be made and executed within a very short timeframe. The payout structure is typically fixed, for example, 70-95% of the invested amount for a successful prediction, and the remaining percentage (5-30%) is retained by the broker as a commission. If the prediction is incorrect, the trader loses the entire investment.

• • Key Differences from Longer-Term Options:**

• **Speed:** The most significant difference is the incredibly fast expiry time. Decisions need to be made almost instantaneously.
• **Leverage:** Short term options offer high leverage, meaning a small price movement can result in a significant percentage return on investment – or loss.
• **Volatility:** These options are highly sensitive to market volatility. Even minor price fluctuations can significantly impact the outcome.
• **Trading Frequency:** Traders execute a much higher number of trades compared to longer-term binary options.
• **Emotional Control:** The rapid pace demands exceptional emotional discipline to avoid impulsive trading decisions. Trading psychology is vital.

1. 1. Underlying Assets

Short term expiry binary options are available on a wide range of underlying assets, including:

• **Forex (Currency Pairs):** EUR/USD, GBP/USD, USD/JPY, AUD/USD, etc. – These are among the most popular assets due to their high liquidity and volatility. Understanding Forex market dynamics is crucial.
• **Stocks:** Apple (AAPL), Google (GOOGL), Microsoft (MSFT), Amazon (AMZN), Tesla (TSLA), etc. – Stock options can be influenced by company-specific news and events.
• **Commodities:** Gold, Silver, Oil, Natural Gas – Commodity prices are affected by global supply and demand factors.
• **Indices:** S&P 500, NASDAQ, Dow Jones, FTSE 100 – Indices represent the performance of a group of stocks.
• **Cryptocurrencies:** Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) – Cryptocurrencies are known for their extreme volatility, making them popular (and risky) for short term options. Understanding Cryptocurrency trading is essential.

1. 1. Risks Associated with Short Term Expiry Binary Options

Short term expiry binary options are inherently risky. Here’s a detailed breakdown of the potential pitfalls:

• **High Probability of Loss:** Due to the short timeframe and market noise, the probability of predicting the correct price direction is lower compared to longer-term options.
• **Rapid Loss of Capital:** The all-or-nothing nature of binary options, combined with the fast expiry time, means that capital can be lost very quickly.
• **Emotional Trading:** The pressure of making quick decisions can lead to impulsive and irrational trading behavior. Risk management is paramount.
• **Broker Manipulation (Potential):** While regulated brokers are generally trustworthy, there have been instances of unethical practices in the binary options industry. Always choose a reputable and regulated broker.
• **Over-Trading:** The ease of executing trades can encourage over-trading, leading to increased losses.
• **Slippage:** In fast-moving markets, the price at which your trade is executed may differ slightly from the price you intended, especially during peak volatility.
• **Commissions & Fees:** Broker commissions can eat into potential profits, especially with frequent trading.
• **Market Volatility:** Unexpected market events can cause significant price swings, making accurate predictions extremely difficult. Staying informed about economic indicators is key.

1. 1. Trading Strategies for Short Term Expiry Binary Options

While the risks are high, several strategies can improve your chances of success. Remember that no strategy guarantees profits.

1. **Trend Following:** Identify the prevailing trend (uptrend or downtrend) and trade in the direction of the trend. Use moving averages and trendlines to confirm the trend. [1](https://www.investopedia.com/terms/t/trend-following.asp) 2. **Breakout Trading:** Identify key support and resistance levels. Trade in the direction of the breakout when the price breaks through these levels. [2](https://www.babypips.com/learn/forex/breakout-trading) 3. **Range Trading:** Identify a trading range (a period where the price oscillates between support and resistance). Buy at the support level and sell at the resistance level. [3](https://www.schoolofpips.com/range-trading/) 4. **News Trading:** Capitalize on price movements following the release of major economic news announcements (e.g., employment data, GDP figures, interest rate decisions). [4](https://www.dailyfx.com/news/economic-calendar) 5. **Bollinger Bands Strategy:** Use Bollinger Bands to identify overbought and oversold conditions. Buy when the price touches the lower band (oversold) and sell when it touches the upper band (overbought). [5](https://www.investopedia.com/terms/b/bollingerbands.asp) 6. **Moving Average Crossover:** Use a combination of short-term and long-term moving averages. Buy when the short-term average crosses above the long-term average (bullish signal) and sell when it crosses below (bearish signal). [6](https://www.tradingview.com/chart/ideas/moving-average-crossover/) 7. **Candlestick Pattern Recognition:** Learn to identify common candlestick patterns (e.g., Doji, Engulfing patterns, Hammer) that can signal potential price reversals. [7](https://www.investopedia.com/terms/c/candlestick.asp) 8. **Fibonacci Retracement:** Use Fibonacci retracement levels to identify potential support and resistance levels. [8](https://www.babypips.com/learn/forex/fibonacci-retracement) 9. **Japanese Candlestick Analysis:** Analyze the shapes and patterns of candlesticks to predict future price movements. [9](https://school.stockcharts.com/doku.php/technical_analysis/chart_patterns) 10. **RSI (Relative Strength Index):** Use RSI to determine if an asset is overbought or oversold. [10](https://www.investopedia.com/terms/r/rsi.asp)

1. 1. Essential Technical Analysis Tools

Successful short term expiry trading relies heavily on technical analysis. Here are some essential tools:

• **Charting Software:** TradingView, MetaTrader 4/5 – For visualizing price charts and applying technical indicators.
• **Moving Averages:** Simple Moving Average (SMA), Exponential Moving Average (EMA) – For smoothing price data and identifying trends.
• **Support and Resistance Levels:** Identifying price levels where the price is likely to find support or resistance.
• **Trendlines:** Drawing lines to connect higher highs (uptrend) or lower lows (downtrend).
• **Bollinger Bands:** Measuring price volatility.
• **RSI (Relative Strength Index):** Identifying overbought and oversold conditions.
• **MACD (Moving Average Convergence Divergence):** Identifying trend changes and potential trading signals. [11](https://www.investopedia.com/terms/m/macd.asp)
• **Stochastic Oscillator:** Similar to RSI, identifying overbought and oversold conditions. [12](https://www.investopedia.com/terms/s/stochasticoscillator.asp)
• **Pivot Points:** Identifying potential support and resistance levels based on previous day's price action. [13](https://www.investopedia.com/terms/p/pivotpoints.asp)
• **Ichimoku Cloud:** A comprehensive indicator that identifies support, resistance, trend direction, and momentum. [14](https://www.investopedia.com/terms/i/ichimoku-cloud.asp)

1. 1. Risk Management Strategies

Effective risk management is *critical* for survival in short term expiry trading.

• **Small Investment per Trade:** Never risk more than 1-2% of your total trading capital on a single trade.
• **Stop-Loss Orders (Not Available Directly in Binary Options):** While binary options don't have traditional stop-loss orders, consider using a strategy where you limit the number of consecutive losing trades before taking a break.
• **Position Sizing:** Adjust your trade size based on your risk tolerance and account balance. Position sizing is a key skill.
• **Diversification:** Don't put all your eggs in one basket. Trade different assets to spread your risk.
• **Avoid Over-Trading:** Stick to your trading plan and avoid impulsive trades.
• **Emotional Control:** Manage your emotions and avoid chasing losses.
• **Demo Account Practice:** Practice with a demo account before risking real money. Demo trading is invaluable.
• **Record Keeping:** Keep a detailed record of your trades to analyze your performance and identify areas for improvement.

1. 1. Choosing a Broker

Selecting a reputable and regulated broker is paramount. Look for brokers that:

• **Are Regulated:** Ensure the broker is regulated by a reputable financial authority (e.g., CySEC, FCA, ASIC).
• **Offer a User-Friendly Platform:** The trading platform should be easy to use and provide the necessary tools for analysis.
• **Provide Competitive Payouts:** Compare payouts offered by different brokers.
• **Offer a Demo Account:** A demo account allows you to practice trading without risking real money.
• **Have Responsive Customer Support:** Ensure the broker offers prompt and helpful customer support.
• **Transparent Fees:** Understand all fees and commissions charged by the broker.

1. 1. Conclusion

Short term expiry binary options offer the potential for rapid profits, but they also carry significant risk. Success requires a thorough understanding of the underlying mechanics, effective trading strategies, disciplined risk management, and a commitment to continuous learning. Beginners should start with a demo account, practice diligently, and gradually increase their risk as they gain experience and confidence. Remember that trading involves risk, and you could lose all of your invested capital. Financial risk management is your primary concern.

Options trading requires continuous adaptation and learning.

Start Trading Now

Sign up at IQ Option (Minimum deposit $10) Open an account at Pocket Option (Minimum deposit $5)

Join Our Community

Subscribe to our Telegram channel @strategybin to receive: ✓ Daily trading signals ✓ Exclusive strategy analysis ✓ Market trend alerts ✓ Educational materials for beginners