Choosing the correct expiration time is very important. The main factor that has an effect on it is your trading strategy, which determines periods of options purchase according to resulting signals. Contract expiration is not an ordinary option, it has an impact on the risks' level.
This is a certain time period completion of which leads to the transaction closure with some result. For example, the period is 15 minutes. After that time trader will understand, will there be a stake or a fail. Conditions check before position opening is automatic.
Different kinds of binary options give investor the opportunity to choose suitable terms of expiration. Some variants are always available at trading broker platform.
Each broker has own trading conditions, so expiration time is always different. There are both short-term contracts and deals that last more than a month. Each type has own profitability percentage, taking into account different degrees of risk.
Newcomers do not pay enough attention to the time factor and its effect for final result. Understanding the importance of its study comes only with real trading experience.
If you have doubts, choose a long one. A short period of time is just part of a big picture of events, so you must focus on a massive analysis. That means noticing quotations' moves at different time frames to find a process of shaping of a new trend. Several minutes or hours contracts are risky; newbies loves it for fast results and high profitability. But the problem is in misunderstanding lots of features and they lost their deposits mostly often.
Classic technical analysis does not work here. You can't work with news constantly, because brokers prefer to close access to transactions together with the publication of related information. You can use only luck or other approaches, for example, trend lines. So experts recommend you to start working with long-term contracts. They are easier to predict, and your risks are less. The income is also lower, but this is the best way.
With a set of experience, you'll navigate better in choosing options to finds the best ones in accordance with a specific situation.
There are several general categories of options by expiration.
1. Ultra short
Validity: up to 24 hours. Best time is up to 1 hour. You can use it when choosing a special strategy. The complexity of the category is always in minimum amount of input data.
It works from 1 day up to 1 week. You'd better close all positions before Friday. Weekends often bring unexpected fluctuations in quotations, which can harm your positions.
Validity: from 7 days up to 30 days. You need to filter and confirm trade signals through several sources. You need to consider all factors of influence on the price during the analysis.
It works from 1 month up to 1 year and even longer. This is the choice of professional players and large financial institutions. Terms of trade here are very different from other types of contracts. For example, a very high price of minimal bet. Literally everything is taken into account in the analysis process here.
Expiration time is also can be related to its type. American options are more flexible instruments, with which you can shorten the term of expiration if there's a bet already. This is very useful for correcting random errors. European options have no such features.
Somewhere you can find useful option of extension of closing time. If you are sure of further growth, this option helps you to make a profit.
Trading assets and transactions duration:
You need maximum of useful information working as a beginner. This fact determines your choose.
For example, stable prices for goods are easier to predict. It will be better to make a lot of deals for a short period of time. Remember, that short-term contracts stimulate the growth rate of the trader's experience, but they are more dangerous.
Shares and currencies tend to show volatility, so it'll be better to work with it in long term perspective.
The contract period is an important condition for the effectiveness of the trading strategy. If you use prepared recommendations, you this factor will be set to the optimal value.
Using the strategy from Internet, don't forget about such moments, as:
So learn to understand the news background, data publication time and its potential impact on market and situation.
The most effective way to find enter points is to learn some schedules. For example, the basic and the other one which is lower by two time frames. If your main time frame is D1, you need to learn “younger" time frame H1 to find the best moment to purchase the option. Given this, the time limit can be multiplied by two.
Expiration time is an important element of any strategy which determines the degree of risks. The validity of a particular contract must be determined after a detailed analysis of the schedule. The financial instrument of trading is also important here. Indexes, currency pairs and stock market positions have different time frames.
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