Once you have decided to start trading binary options, you will realize one thing. There are a considerable number of expiry times to choose from. Now, it may seem relatively simple. After all, you just have to choose when a trade is going to end.
If you have ever placed a trade, however, you are aware that there this expiry time holds a great deal of weight. In the end, it may be the difference between you winning or losing a trade. If you want some insight on how best to choose the expiry time, keep reading:
Short, Medium, or Long Term Trades
This is probably one of the biggest debates among traders – what is the ideal trade time period. Short trades are typically defined as those lasting less than five minutes. Medium trades can range from about five minutes to a couple of hours.
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Long term trades may even last a full twenty four hours. When it comes to short and long term trades, there is often a lot of arguments. This is because some traders feel it is easier to determine the outcome of short term trades.
Others, however, feel that a longer time period is simpler to predict. Most will agree, however, that medium length trades are the most prudent. This is due to the fact that these intervals tend to work well regardless of the market situation. With these, you can benefit from the release of new information as well as prevent your funds from being unnecessarily tied up.
Balancing Risk with Payout
So, if medium trade lengths are the easiest to predict why are they not more popular? The answer to this is simple – the payout rate. The payout rates for mid-range intervals are a great deal smaller than with short term trades. Therefore, they are less likely to appeal to traders. As there is a greater amount of risk with short term trades, the payouts are often excellent. Long term trades, much like the medium term trades, have lower payout rates. It is important to realize that regardless of what you choose, you are trading one aspect for another. Thus, you need to decide which is more important to you.
Expiry Times and Assets
Now, what most traders fail to take into consideration is the correlation between asset type and expiry time. Asset types are quite different to one another and as such behave differently. This includes how much their value fluctuates given a certain time period. Take commodities, for instance. Unless there is a particularly volatile market situation, it is unlikely that the price is going to change quickly. Therefore, you will have better luck with short term trades.
Conversely, with stocks, you are typically only able to discern any real changes over a longer period of time. This is why long term trades are more appropriate in such a situation. With currencies, you will find yourself being more successful in medium to long trades as the currencies tend to fluctuate minutely over short periods of time.
The Deciding Factor
To start off with, you may experiment with a variety of expiration times. After all, it is only with practice and experience that you can truly decide what is best for you. You may find yourself being more comfortable with one expiry time over another. This is fine as long as you conduct the proper analysis before deciding on an expiry time. This is because what will work in one market condition will not prove to be successful in a contrary situation. This means that you should not begin to automatically rely upon one interval over another.
All of this information will help you with how to choose a trade expiry time. Remember to always base your decision on fact and research rather than intuition or ease of method.