Choosing the right expiration for fixed-payout contracts is crucial for digital options contracts, as it directly affects your eventual profits in the financial markets. Expiration time, or expiry, is a moment in the future when the digital options contract expires and the results are calculated. After you choose the expiration time, you can’t change it anymore. Therefore, you should be careful when planning your next fixed-time trade in the financial markets. By reading this article, you will find out more about how to choose expiration in fixed-payout contracts. If you are ready to trade digital options, then you can open an account at Binolla.

Why Expiration is Important?

Imagine a situation when you decide to buy a Higher digital options contract for EUR/USD with a strike price of 1.1000 and an expiration date of one minute. You have analyzed the charts with the financial asset and assumed that the price is going to grow over the next couple of minutes. However, at the moment of the expiry, the price is 1.0999. Later, the price resumes its growth and reaches 1.1010.

This is a great example revealing the importance of expiration in digital options trading. You can be right about the price direction, but if your timing is wrong, you may fail. 

The key idea here is that in fixed-time contracts expiry is of equal importance to trend detection. Whether your forecasts about future price fluctuations in the financial markets are right or wrong, you should also be precise in choosing the expiration time.

One of the key features of the digital option is that you can’t change anything once you buy this type of contract. Therefore, you should be very precise and careful when picking expiry.

The example above demonstrates how important it is to choose the proper expiry in digital options. The currency pair is in an uptrend. However, at some point, it goes below the strike price (a red line that shows the value of the asset at the moment when you buy a contract). If this were your expiry, you would take losses from this position. Further on, the currency pair resumes its growth. 

Types of Expiries at Binolla

There are three main expiry types that you can find on the Binolla platform. They are the following:

• Scalping digital options. Those are financial contracts that can be bought with a 5 second expiry. This is a special feature of our platform that you can use to trade almost instantly.;
• Short-term contracts. These digital options cover contracts that are bought for an interval within 30 seconds to 1 minute;
• Mid-term digital options. You can buy fixed-time financial contracts with an expiration time of 1 minute to one hour;
• Long-term digital options. Finally, you can purchase digital options with expiration time of 1 to several hours.

Keep in mind that gradation is related to digital options only. When it comes to Forex CFD, mid-term lies between several weeks and several months normally.

Choosing the Right Expiration: Tips and Tricks

While it may seem very simple to choose the right expiration, several pitfalls should be considered when a trader picks an expiry. Find some key recommendations below.

Think about Your Psychological Traits

The first and most important recommendation is to think about your psychological features. This may help you define which type of trader you are and, therefore, facilitate the process of choosing the right expiry in the financial markets.

We have highlighted the three main types of trading strategies that are related to digital options above. Before thinking about what expiry to set in your next trade, you should consider this information and make a data-driven decision.

Scalping or an ultra-short trading strategy is a great and seductive opportunity to make about 85% of your financial investment within a couple of seconds. However, this trading style is not for all. You should have special psychological traits to trade within several seconds. First of all, you should be fast enough to react to any financial market opportunity.

If you are not ready to work with fixed-time options in this stressful environment, it is better to choose short-term or even mid-term expiries, as they allow you to think wider and offer enough time to plan your Forex trading routine carefully.

Check Your Current Timeframe

The timeframe is another important aspect when choosing the right digital contract expiry in the financial markets. Depending on what timeframe you choose, you can set expiration time. For instance, if you are currently analyzing the market on a 5-minute chart, then it is better to choose expiration between 5 and 20 minutes on average.

The example above allows you to see how to pick the right timeframe and think about the proper expiry in financial markets. If you use the first green Shooting Star pattern to buy the Lower digital contract on a 10-second pattern, you can assume that you can choose 10 or even 20 seconds of expiration. 

The red line shows the strike price. Therefore, in this particular example, even when the price reversed from its local two-candlestick downtrend, you are still in-the-money. Therefore, if you bought the Lower contract with a 30-second expiration, you would still be able to rely on profits.

Check the Upcoming Data Releases

Key macroeconomic financial data releases normally have a significant impact on various assets and even markets. When thinking about buying a particular contract, you should also consider the upcoming news. If there is an important data release that will be published within the expiration interval, then you can expect a serious price movement that will help you achieve your goals if you were right to establish the direction and pick the appropriate FX option. The key data releases that you should think about are:

• Central banks’ meetings;
• CPI data;
• PPI data;
• GDP data;
• ISM PMI indicators;
• Trade balance (for export-oriented currencies);
• Labor market statistics.

Before trading any of the news, keep in mind that the event-trading financial strategy in digital contracts is risky and sometimes even more dangerous than trading on calm markets, which are more susceptible to classic technical analysis.

Use Your Strategy

When thinking about the proper expiration, you should consider your strategy first. If the price of the asset stays in a horizontal range, for instance, the easiest way is to buy Lower contracts when the price is close to the resistance level and Higher contracts when the price is close to the support level.

You can calculate the width of this range in pips and think about how much time the price will need to cover this distance. Therefore, you will be able to set the proper expiration date for this particular trade.

Keep in mind that with digital options, you can join the market at any moment with the perspective of earning money. You don’t necessarily need a clear pattern to trade.

In the example above, we have a break-out situation when the price of the underlying asset breaks below the support line with clear and strong momentum. You can use this momentum to buy a Lower contract. Assuming that we have a 1-minute timeframe, you should choose expiration within 1 minute.

You can equally use some free online momentum indicators like RSI not only to receive trading signals but also to think about expiration. In the example above, we have a clear signal to buy a Lower contract as the RSI indicator with a 14 period leaves the overbought area. Taking into consideration that the signal comes from a 10-second chart, we can expect it to work for another couple of 10-second candlesticks. Therefore, you can set the expiration time between 10 and 30 seconds.

How to Set Expiry on the Binolla Platform?

The process of setting the expiration time in the Binolla account is very simple. You need to enter the platform and move the mouse to the right side of the screen, where you can see the word “Expiration” and time in mm:ss format. To set expiry, you need to use “+” and “-”. If you want to learn more about how to trade with the Binolla platform, read here.

Conclusion

Choosing expiration is crucial for digital options traders. Even if you are right about the future price movement direction, you still need to set the proper expiry to make profits in this type of financial instrument. Knowing some basic secrets, you can adjust your strategy and find the best possible expiration time for a particular underlying asset.

FAQ

Can I Adjust the Expiration Time After I Open a Trade?

No, you can’t. Once you buy a digital option with a particular expiration time, you can’t change it until the contract expires. Therefore, you should be careful when planning the longevity of your fixed-time contract.

What Types of Tools Can I Use to Define Expiration?

You can use all types of analysis tools to define expiry. For instance, you can apply technical indicators or even some drawings to the chart and calculate the expiry based on your trading strategy. All of them are of great value, and you are free to use them.

Is it Important to Properly Choose the Timeframe to Define Expiration Time?

Yes, it is. To be able to determine expiration, financial markets traders use appropriate timeframes. For instance, if you are going to trade within one minute, you can choose between 5s and 1m time intervals.