Recently we’ve seen articles that say things like this. “You can make it big in binary options if you do a Boundary trade, a kind of strategy which …” A Boundary trade is a type of trade offered by many binary options brokers, but it’s not a strategy for trading. A strategy is a method of decision-making that allows you to choose optimal entries and exits for different types of trades including Boundary trades.

What Is A Boundary Trade?

A Boundary trade is a trade where you basically wager that the market isn’t going anywhere. It’s an interesting type of trade since there is no equivalent if you’re trading Forex or doing some other more traditional type of trading. Traditionally you profit off of market movements. With a Boundary trade you define a channel where you expect price to range. If price stays in that range during the expiry period, you will win your investment. If it journeys beyond that range, you’ll lose your investment. Boundary trades are also called Range trades.

Boundary Trade Is Not A Strategy

Sometimes people say that a Boundary trade is a strategy for profiting in ranging markets. A Boundary trade gives you a type of trade that you can make in a ranging market, but it doesn’t specifically give you a strategy for doing so profitably. A strategy is something that helps you to recognize the appropriate conditions for entering the trade in the first place. Strategies usually take the form of technical or fundamental analysis or price action. An example would be that some indicators on your chart have shown you that you’re in a ranging market and no breakout is likely; perhaps moving averages on either side of the channel can help you define the ranging area. Or maybe some fundamental news event is driving price into a narrow channel.

Understanding what price is doing is something that is a great deal more complicated than learning how to hit “Buy” on a Boundary option. You have to learn why or when to hit “Buy” on that option. You can’t just hit “Buy” because you know how to click your mouse. That’s how you lose money. Nothing is as easy as just clicking a mouse, otherwise think how rich everyone in the world could be! Very few people will trade professionally, and that’s true whether you’re talking about binary options, stock trading, or any other type of trading.

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So to summarize, a type of trade is not to be confused with an investment strategy. A type of trade is simply a set of constraints that are offered by your broker. A strategy is what tells you to enter or not enter into a given type of trade. There are many strategies out there for profiting in ranging and trending markets and for succeeding with Boundary trades and other types of trades—but you need to learn how to recognize context and entry signals before you can succeed with any trade type.

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