Expiry Times in Binary Options Trading
After choosing high or low, picking the right expiry is the hardest thing for traders to decide. Several factors can impact which expiry is the right one. Failure to pick the right one can often mean the difference between an option closing in or out of the money.
Expiry times in online trading are the time limits until which the prediction made by the trader will have to come true in order for the trader to win the purchased binary options contract. Expiry times are basically the deadline of an options contract.
If the prediction made by a trader will not come true by the time of the expiry, the trader will lose the investment. If the prediction will come true after the time of the expiry, the trader will still lose his or her investment. Only what happens at the moment of the expiry matters.
Binary options expiration times are displayed on a countdown clock format related to every option. Here, players will be able to watch the time remaining until the options contract expires. Once the contract expires, the trader is not able to perform any more actions related to the expired contract.
Types of Binary Options Trading Expiry Times
Most binary options brokers offer fixed expiry times that were previously established. However, some other brokers will allow traders to choose the expiry times that fit their trading style and trading strategies the most. There are basically two types of expiries.
The three expiry times to consider in binary options trading
Timing is not only the most important factor in binary options trading due necessity for the expiry times of the options to be precise; it should be considered in a number of diverse ways. By looking at timing in three distinct ways can assist new traders in their analysis of the markets and in pinpointing potentially profitable opportunities. Although these simple tenets seem fairly basic, including them as part of binary options trading analysis will help many newer traders form a cogent trading strategy.
Short binary options expiration times are those expiry rate that range only in a few minutes. The most common range for these expiries is 1 minute to 5 minutes.
Binary options with short expiry times are a bit harder to predict than contracts with longer expiration times. This is because it’s much harder to predict the movement of certain assets within a time frame of just a few minutes.
However, these are also the best paying contracts and also the ones that are in our opinion the most exciting. Having to wait a full day for the expiration of a contract is not that exciting to be honest, however, if the contract expires in a few minutes then you’ll enjoy trading much more.
Contracts that expire between 5 minutes to 1 or 2 hours are contracts with medium expiration times. These contracts may some times pay put better than the ones with shorter expiries. Contracts with medium expiry times are a bit easier to predict than the ones with shorter expiry dates. However, these contracts usually pay out worse than the ones with shorter expiries and in our opinion are less exciting as well.
Some brokers offer online trading contracts with expiration rates of 2 hours to even 24 hours. These are the contracts with the long expiries in the financial trading business. These are also the ones that can be predicted the easiest. Contracts with longer expiries can be predicted easier because it’s much easier to predict the movement of an asset during a longer time frame. These contracts are safer indeed but they are also a bit boring to be honest and offer lower payout rates than other options.
Best expiry times for various assets
Something that perhaps most traders are unaware of is that it does matter what expiry times you choose while using different assets. This is one of the few small things that considerably enhance the winning odds of those traders who are aware of them.
Commodities and indices
In case of commodities and indices, traders are advised to choose short expiry times. This is because commodities and indices are known to be those assets that fluctuate less. As such, making accurate predictions in the short term is very possible.
This will allow traders to purchase more contracts in a shorter time frame and as such, make more money than the usual. In case of forex options it’s recommended to choose medium to long expiries. This is because the exchange rate of currencies usually experiences very small changes very frequently and abruptly. However predicting the overall change in the exchange rate of a currency pair over a longer time frame is actually quite easy.
In case of stocks you traders should choose medium to long expiries. Subtitle changes in the movement of pretty much all stocks are being experienced at almost at a constant basis. However, the movement of most stocks can be predicted with a very great accuracy over a longer time frame such as a few hours.
Choose the Right Binary Options Expiry for you
Like many of the brokers like to point out, binary options are a simplified form of trading. I want to point out that just because they are simplified they are not simple and certainly not easy to trade. Successfully at least. It is super easy to open and account, send some money and place a trade. The hard part is actually trading correctly and being profitable. The most important aspect of the trade is choosing the right direction, whether or not an asset is moving up or down is the most basic aspect of binary trading. The hard part is knowing when, how high and how long an asset will move. All too often I place a trade and watch it move into the money for a while and then right back out resulting in a loss. If you are like me this is super frustrating and why it is important to chose the right expiry.
First off let’s talk about what expiry is. The basic definition is that it is the amount of time until a binary option expires, or the time at which a binary option expires, depending on which broker you are using. I know this may sound confusing but remember, not all brokers list their expiry in the same way. The thing to remember is that the option you buy must be higher or lower (depending on calls or puts) than the price you purchased at expiry in order for the trade to make a profit. If it isn’t then you lose regardless of whether the options was in the money at any time before the expiration so choosing right is of the utmost importance.
Know Your Charts
Knowing your binary options charts is key to successful expiry choices. When I first started charting I learned to measure each and every rally, each and every pullback or correction and each and every bear market. I learned to keep these measurements in a table and to use the averages as a means of determining expiration times. Now, when I first got started trading I was trading equity options but the work I did then is just as useful in binary trading now as it was then. From my tables, which now include years of data, I know what the average length of a short term rally in a bear market is, I know how many short term rallies to expect in a long term bull market and how long each of them is likely to last. I know that when I receive a strong signal on the hourly charts of the S&P 500 that it will move into the money within 3 bars and lead to a rally lasting an average of 17.8 bars so when I choose my expiry it needs to be long enough for the signal to develop but not longer than 17.8..
Some brokers give a list of set times at which the option expires such as 10:45, 11:00, 1:30 or maybe something like end of day, end of tomorrow or end of week. If it is 10:00 AM and expiry is listed as I’ve described the 10:45 expiry is 45 minutes, the 11:00 is 1 hour and the 1:30 is 3.5 hours. If the time at which you place the trade is 1:15 then time to expiry at 1:30 is only 15 minutes.
Other brokers may list fixed expiries like this; 30 seconds, 1 minute, 5 minute, 10 minute, 30 minute or 1 hour. This means that there will be that much time between the time at which you buy the option and the time it expires, no matter when it is you buy. For example if it is 10:36 AM and you buy a 1 hour option it will expire at 11:36AM, if you buy the 5 minute expiry the option will expire at 10:41AM. The best brokers will have a mix of both types of expiry.
Choosing Expiry The Pros Way
Support and resistance levels, news, and your indicators are all important things to keep in mind when choosing the right binary options expiry the pros way. Support and resistance levels are a proven technique for finding areas where the market may be temporarily or permanently halted or reversed. If an asset is trading to closely to one it may seriously impact the reliability of any given signal. For example, an asset is trending up on the hourly charts and you receive a strong stochastic signal. Ordinarily a one hour expiry would be more than enough for this trade but at this time the asset is trading very close to a long term resistance line. The asset moves up but is halted at the resistance line and then moves lower, leaving your trade out of the money.
Trading news is another big influence on the market and something that many traders will tell you to avoid. It is not uncommon for news to be unexpected or surprise by being better or worse than expected and send the markets careening off in the opposite direction from where a signal may be indicating. Sometimes news as expected is not enough to keep the market moving in the same direction as expectation. It’s a good idea to keep up with news events that have the potential to move the asset you are trading. Major economic events, earnings and politics are three things all traders should be keeping up with anyway. Often time major market moves will converge with an event, the monthly FOMC meeting is one I have noticed, that is often at a critical turning point for the markets.
Your indicators also have a big influence on which expiry to choose. Convergences anddivergences can occur in any time frame or even between time frames. A convergence is when price action and two or more indicators or time frames are in agreement, producing the same signal at the same time. This is a stronger signal than when only one indicator or time frame is producing a signal. A divergence is when price action and the indicators are not in agreement. Divergences are often used by contrarian traders as a signal to trade opposite the underlying trend. When I spot a convergence I know I can use a shorter amount of expiry because the signal is stronger and more likely to happen sooner. When I spot divergences I am extremely cautious, will look for reversals and may even choose not to trade.
Factors Affecting Expiry Choices
There are a couple of things that can affect which expiry you choose, along with your strategy. Some strategies are intended for very short term market moves and may recommend using very short expiry, other strategies are intended to identify much longer market moves and may need more expiry.
Choosing the right time frame may be the most important factor when choosing expiry. Time frame refers to the chart length or perspective you are trading. Longer time frames equal longer expiries, short time frames equal shorter expiries. If you are trading on a chart of 1 minute prices using expiry of end of week is not appropriate any more than using 1 minute or 5 minute expiry while trading off of the one hour, 4 hour or daily charts. I like to use three different time frames in my regular analysis; weekly charts, daily charts and hourly charts, even when I may be trading off of 1 minute or 5 minute charts. Each time frame presents it’s own signals, each is affected by news and other factors differently and each requires expiry tailored to fit.
Think about it like this; If we assume that it may take 2-4 bars for a signal to produce a profitable market movement then we need to allow enough expiry for that many bars to form on the chart. As a rule of thumb any signal taken on the chart of weekly prices gets at least a week or two until expiration. This is because it may take a week or more for the signal to develop into an actual price movement. When I take a signal on the daily chart expiry ranges from a few days to a week. Moving down one time frame to the chart of hourly prices I also move down in length of expiry. In this time frame my chosen expiry will range from an hour or two up until the end of the day, depending on when the signal is taken. If I trade off the one minute charts an expiry of 60 seconds to 5 minute is appropriate.
Binary Options Brokers with the Most Flexible Expiry Times
When it comes to binary options expiration dates, traders should choose those brokers that have the most flexible expiries. If you’ve read the paragraphs below, then by now you’ll know that the correct usage of expiration times is a very important factor in developing a winning online trading strategy.
If only a very limited selection of online trading expiration rates are offered, then traders won’t be able to use the strategies and tips described above. Some fraudulent brokers intentionally don’t offer a flexible selection of expiries in order to prevent traders from winning.
However, all serious brokers offer multiple binary options expiries in order to enable traders to develop their strategies. Only register at these kinds of brokers. Binary options trading isn’t the same as gambling in the sense that in binary trading you can actually increase the winning odds into your favor. However, this can only be achieved at a legitimate broker.
The brokers we list on our website are all legitimate companies that offer a very large variation of expiry times. Register at these brokers and you’ll be able to use all the strategies and tips that we’re teaching you on our website.
Choosing the time of day and active binary options markets
Several binary options markets run 24 hours per day, including currency and commodity markets. This makes the decision of when to trade somewhat more complex than traditional markets offer. For those with the luxury of actually choosing when they can trade the dilemma is even more pronounced, and the temptation to trade less profitable market opportunities is ever present for this group of traders.
Choosing a time to trade will depend largely on geography but it should primarily be dictated by the existence of market opportunities. Pinpointing those markets which are going to offer a trader the largest number of reliable binary options setups is essential. This will initially avoid the frustration created by slow and inactive markets resulting in poor trading decisions. The available markets which are active and open at the time of trading should be the key focus. If this is outside the hours of the local markets then it is well worth researching which markets are globally the most active both before and after the local trading session.
Timing the entry with binary options
If the expiry time is considered the most decisive part of binary options trading, then a good entry is the most important factor. Every trader has experienced the feeling of spotting a great opportunity only to purchase options at a poor price and resulting in a loss or a needlessly nervous expiry. One technique to help improve entry timing for binary options traders is to look for entries on higher time frames and pinpoint the entry on a lower chart. Alongside keeping an eye on the higher time frames to avoid trading in to poor areas, viewing these charts can also provide a good opportunity to get involved in powerful setups which will dominate the smaller time frames in the near future.
Binary options traders can therefore spot a setup on a higher time frame, and refine their entry using the lower time frames in accordance with this. An example of this would be trading the “pin bar” candlestick reversal pattern using the 1 minute charts. Looking for agreeable trades on the 1 minute chart in the direction of the trade setup on an hourly chart will substantially improve the likelihood that the trade entry results in a positive outcome.
The bottom line
Choosing the right expiry can be a daunting and frustrating task for a newbie but it is not impossible. The beauty of binary options is that expiry is really the only thing besides market direction affecting your trade. The best thing I can recommend for newbies is to choose a single asset, maybe two, and become very familiar with them, their charts and the time frame you wish to trade in. Start by measuring the charts as I explained, keep up with the news and eventually you will connect the dots to becoming a true binary options trader and be in tune with the market, able to pick the perfect expiry with ease.