3 Ways To Make Money In A Flat Market
Binary options has its drawbacks, but one of its biggest advantages over other types of trading is the fact that you have a shot at making money even when the market is doing absolutely nothing. While catching the big movements can be highly lucrative, the market does not spend all that much time making these huge volume swings. Most assets spend the majority of their time leveling out and consolidating. If you are a traditional stock or currency trader, profiting during consolidation is tricky. And if the market is hardly moving at all, it is nearly impossible, since movement is what you profit on. But there are several different ways you can make money during these still times when you trade binary options.
No Touch Trading
One type of trade which allows you to make money when price is sitting still is called “No Touch.” No Touch trading is not offered by every broker, but it is a pretty common type of trade. It is based on the similar “One Touch” trade, where you bet that a particular asset will reach a given trigger value within a certain expiry timeframe. With a No Touch trade, you are simply betting that price will not reach that level.
So for example, let’s say you have been following EUR/USD, and that right now, EUR/USD is trading at 1.34900, and has been sitting at roughly that price range for a while. Maybe it is making small movements up or down, but it is refusing to break out. There could be strong support and resistance constraining it, or another reason that the currency isn’t going up or down. Whatever the reason is, if you are confident that EUR/USD is going nowhere, you can place a No Touch trade on the currency (if you were a Forex trader on the other hand, you would only be able to wait around until the pair moved).
Your No Touch trade might include a trigger value of 1.35100, and an expiry time of an hour. In that example, you are wagering that EUR/USD will not move up in value to 1.35100 within the hour. If you are right, and EUR/USD does not touch that price level (even if it comes within a single pipette of it), you will make money. If, on the other hand, the currency rises to or past that point, you will lose your trade. That means if the market continues to consolidate within the limits you have specified, you will profit. Only if there is a major change and the currency makes a move upward will you lose. The closer the trigger value is to the current price when you open the trade, the more money you will have the potential to win. One Touch trades can pay out quite a lot of money if you are willing to play a tight game. You can make as much as 500% on some positions!
Boundary Trading
Another way you can make money with binary options when nothing is happening is by participating in a Boundary trade, also known as a Range trade. Open up a chart of an asset which is consolidating, and try drawing trend lines across the highs and lows. You will discover that price is moving up and down inside of a clearly defined “channel.” The channel’s upper and lower limits define a range, which is how Range trading takes its name. You can look at these limits as boundaries as walls confining price. The support and resistance become stronger each time price tests the limits and fails to get past them.
It is a given that eventually any asset will break out of its consolidation range and make a move. But since markets spend more time in consolidation than they do breaking out and trending, it is sensible to try and make money during these quiet times. If you believe you have a firm understanding of the upper and lower limits of a range, why not apply that knowledge to binary options and turn it into profit?
You could place a Boundary trade instead of a No Touch trade on the currency pair above in our previous example. You might choose to do this if your broker offers you Range trading but not No Touch trading, or you might do it because you are being offered a higher payout for a Boundary trade.
If price is trading around 1.34900, you may draw your trend lines and discover that there is a channel which seems to define its support and resistance boundaries at 1.34400 and 1.35600 respectively. Those are the levels price is bouncing off of. Given the same expiry time, your system tells you that price will continue to stay within those confines. You place the trade, and during the hour, price moves up and down within the Range you defined, but does not touch either limit (you want to define the Range just past the actual boundaries—this is equivalent to a Double No Touch trade). Because there was no breakout, you win your trade.
If, conversely, price were to touch either limit, you would lose. This could happen if there was a breakout and the formation of a new trend began, or it could happen if price spiked above or below your resistance or support lines, and then turned back around and returned to the channel. Trading when the market is relatively tranquil is not without its risks.
Scalping
One more way you can try to make some money when price is relatively flat is to profit off of very small movements in price. You can do this with fast binary options like 60- and 30-second trades. With these options, your trades expire in just 30 to 60 seconds. So let’s consider EUR/USD once again. Even if price is moving only within a dozen pips or less of 1.34900 in either direction, you can make good money off of those tiny movements. How? By analyzing them correctly.
Take note that with longer-term trades, you can still technically profit off of tiny price movements. If you were in a trade lasting several hours, and you wagered that EUR/USD would be trading above its current value by so much as one pip by the end of the expiry time, you would still win your trade if that was all it did. The longer you are in a trade, however, the more time you give the asset to make larger moves in either direction. The farther price moves away from its initial value, the longer it will take to get back, so if the trade is going against you, you are not likely to win.
Click here for more details on longer trades.
With a short-term trade, you reduce your exposure to those longer movements in price (even within a consolidating market). You also base your trades off of data from charts on shorter time frames, looking at one-minute or five-minute data. If you become very good at understanding and predicting these tiny price movements, you can profit off of them.
Traders who only stay in a trade for a couple of minutes or less are called scalpers. These traders may make money off of the tiniest fluctuations in the price of a currency, stock, index, or commodity. Longer-term traders who are looking at the daily or weekly movements may be seeing no movement, but on those short-term time frames, you may be seeing plenty! If you get into a 30-second trade on EUR/USD, predicting that the currency pair will be trading above 1.34900 in 30 seconds, and the pair closes at 1.34910, you won your trade!
Test Your Strategies
It is exciting to be able to think about making money off of minute fluctuations in the price of an asset—or even off of no movement at all. Never forget the flip side of the coin of profit though, which is loss. Just because price is not swinging wildly up and down, that does not mean that you are not dealing with some degree of unpredictability. Whether you decide to get into scalping, Range trading, or No Touch trading, test all your techniques before you trade live with real money. Learn more about the best types of trades for different market conditions.
Check out these types of trades as well – Hedging and Ladder Options? Will either of those work for you as a trader?