The Expiration is the moment that a trade is closed, and the results of the trade are fixed. The periods selected influence the duration of the trade. Learn that every strategy is only capable of generating forecasts within specific periods of time, expiration parameters are key. This is especially true when trading with Turbo options. There, every minute could be the decisive one in regards to the final outcome of the trade. In this article, we will go through everything that affects expirations and provides you a comprehensive answer to the question of how to choose the right trade duration.

 

Learn the Right Option Expiration for Your Trade

 

Definition

At the start of the article, we already defined the term, it is the moment a trade is closed. However, it is worth a few more moments of consideration. In part, trade duration can be measured in specific time units, for example, the unit of 1-minute functions as an indicator of what time to leave the market. In this first case, the time of an option is always fixed, right down to the exact second. If the point of expiration is shown by minutes (15:30 for example), not by duration, then the actual duration of the trade varies based on when the trade was entered.

This working framework is implemented on the trading terminal Binomo. Therefore, there, actual Turbo-option trade duration fluctuates from 30 to 90 seconds. If you enter the market at 12:15:25 with a trade for 1 minute, then the soonest point of expiration will be 12:16:00, meaning that the actual operation duration is 35 seconds. Traders must learn this moment when trading. For convenience on the terminal when selecting a specific expiration, there is a vertical line on the chart that signifies the finish.

 

Classic Option Types and Their Duration

Traders have various different approaches to this process given the wide array of trading periods. The majority of users, especially beginners, prefer minimal timeframes, with periods up to 5 minutes. More conservative traders usually trade in hourly intervals, or within the confines of one day. Some companies, aimed at professionals, allow trades to be held for several months. This approach enables profiting from long-term trades, up to a year.

Trade Duration Based on Option Type:

• Turbo — from 30 seconds to 300 (1–5 minutes);

• Classic (binary options) — from 5 minutes to the end of that trading day;

• Long-Term — up to 12 months.

These periods are listed on trading platforms and web terminals. However, among traders, they are categorized slightly differently. There are 4 categories, ultra-fast (scalping), short-term, medium-term and long-term. Let’s look into these in further detail.

1. Ultra-Fast. Scalping is when you place a large number of trades over a short period of time. Traders are called scalpers when they trade Turbo options with durations from 1 to 5 minutes. The term was coined by Forex traders. However, it is sometimes applied to trading with options as well, but more rarely, due to several fundamental differences in the trading process. For instance, the total profit isn’t dependent on price behavior, either it the profit will the pre-established amount, or there will be a 100% loss. There is no middle ground.

2. Short-Term. This is the most popular trading approach to trade duration. Every trading operation runs on average from 15-16 minutes to several hours. The defining difference is that positions are never carried into the following day and are always closed by the end of that trading session.

3. Medium-Term. This trading approach is when trades are opened for weeks, and more rarely, up to one calendar month. This framework enables you to catch persistent tendencies that last for more than a 24 hour period.

4. Long-Term. Long-term market operations are advantageous for experienced traders. Long-term trading not only requires a high level of professionalism but also great restraint and patience. Rightly so, when generating a forecast over a long period, traders focus on fundamental market analysis, as opposed to technical analysis. No further commission is required when trades carry over into the following working day. This is one of the main advantages of trading with binary options versus Forex. Professionals have an appreciation for that.

 

Choosing the Right Expiration Period

Trade operation duration, the time present on the market, is one of the key factors in any trading strategy. This doesn’t pose a challenge for experienced traders, as they have already worked out their own style and abide by it, with small adjustments based on whatever situation is at hand. However, this question is a pertinent one for beginners. A mistake of this persuasion can diminish the effectiveness of a strategy and the general trading result. So, when selecting a period of expiration for options it is necessary to take several nuances into account.

Nuance №1 — Timeframe. The time chart interval, where technical analysis is conducted and forecasts are built, is a factor of key importance. The timeframe and expiration are directly connected. The higher the interval is on the chart the longer the duration of the trade. A trading operation cannot run for less time than one candle. Therefore, more often traders are not measuring this indicator as a specific time, but in bars (one price formation on the chart). This approach is applicable to any universal strategy that is suitable for traders in various conditions.

The standard ranges from 2 to 5 candles. For example, if the chart is set up on a minute interval, then the best option for traders would be to use Turbo options with an expiration up to 300 seconds. However, there are quite a few strategies that allow you to forecast the next 10–20 bars. Therefore, in regards to this question, there is no universal answer. Beginners to fully familiarize themselves with the rules of specific trading systems and strictly abide by them. With experience, you’ll develop a “gut” instinct that will enable you to evaluate trade signals regarding the duration of the forthcoming price movement on your own.

Nuance №2 — Indicator Period Settings. This refers not to the chart, but the indicators used. The majority of analysis tools based on the Moving Average have period settings. It has an influence on the number of historical price formations that count when calculating the expected indicator. The longer the period, the more stable the signals, although the time-lag increases as well. If the period is decreased, the opposite situation arises. The delay is nearly eliminated, however, there is a sharp increase in sensitivity. Therefore, the Moving Average starts to react to any chaotic jump in price, that may or may not reflect the real picture of what is going on.

Practical advice for tackling this nuance is as follows. Beginners must carefully study the strategy rules. If a decision is taken in regards to this question independently, then, where applicable, abide by the following points. Firstly, follow visually to evaluate the chart with the specified indicators. Produce an evaluation of the signals based on historical data, their duration. The character of indicator regulation is defined by price behavior. With the in mind, the optimal average value is selected, in respect to the statistic ratio between profitable and losing trades. Secondly, every concrete signal must be evaluated separately when defining potential future movement. This skill is difficult to put into words since it comes to every trader as they gain experience.

Nuance №3 — Levels of Support and Resistance. This is more applicable to specific strategies, although it keys when deciding the period of expiration. The issue is that the price behavior moves within the channel, reflecting off or breaking through the level. On the approach to the next support or resistance line, in nearly 70% of the cases, the market unfolds in the opposite direction. In 3 out of 10 cases, the level is broken through after the price falls within the frame of the other channel. In any case, independent of market conditions, it is always possible to identify the support and resistance on the chart. When trades are running, they are often positioned at an equal distance, parallel to one another, creating a channel from the two lines.

The practical resolution to the aforementioned information is as follows. When selecting a period of expiration, traders must evaluate what the distance to the nearest level is. Simultaneously, asses the indicator volatility to better construct an approximation of how quickly the resistance point will be reached. For example, if the price is roughly in the middle of the corridor, yet, at the same time the trading signal has appeared, then select the appropriate option duration so that the trade will close prior to reaching that level. As there is a good chance that the collision of the price with the support and resistance lines will lead to a trend reversal, and that can hinder profit in its own right.

Nuance №4 — Economic Calendar News Releases. This nuance is more applicable for traders who prefer day trading. The issue is that when key, highly anticipated events take place, the market situation changes. Often, the release of news is accompanied with sharp asset course fluctuations. Whereas the majority of times in this situation, it isn’t possible to predict the path using standard methods of technical analysis. However, it is quite easy to predict when taking the economic calendar into account. It is easy to do so if you use Investing.com’s Economic Calendar as a reference.

Practical advice on this point is simple. Make sure that your trades don’t expire at times when important news is released. The only ones worth planning around are those in the Economic Calendar that have two, or especially three “bullheads”. If there will be important news released that trading day, we strongly recommend you to hold off trading the hour before and after the event. However, that is only applicable to traders using technical analysis strategies. If we are talking about a fundamental approach to generating forecasts, the opposite is true. Important news releases are rare opportunities that practically guarantee to profit from trades. A literate approach to trading the news produces amazing results.

 

Conclusion

In this article, we went through all the key points that beginners should know regarding how to choose the right trade duration. If we were to summarize the information above and draw conclusions, then we would say the following. Trades should choose trading duration periods so that it fits with the conditional period of signal duration.

The forecasting period (“the window to the future”) is strictly limited, for example, for the second or minute time frames, the period is around 1–5 minutes. Keep in mind that those periods of expiration specifically are recommended for beginners, as well as following the rules of trading system you selected. Although it is vital to regulate it yourself if you are not following a pre-prepared strategy, but one of your own device. It comes with practice.

 

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Learn the Right Option Expiration for Your Trade
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