Types of CFD part 2

One Touch CFD is what binary option brokers use to entice traders into thinking there is a possibility to make a 350% return trading options!

forex go up trend

What is One Touch CFD?

With the Nasdaq currently trading at 4376 points. The One Touch CFD only becomes profitable if the Nasdaq moves 2.5% sometime during the next 28 hours. Now, that is very nice, the Nasdaq could spike higher and the trader will earn a profit but when was the last time the Nasdaq rallied or fell by 2.5%?The one touch option is a 28 hour option. The option must be bought before 1:00 pm GMT and it expires the next day at 5:10 pm GMT.

Brokers also list One Touch Options for movements of 1% and 2%, but with lower returns of 150% and 250%.

When are One Touch CFDs Used?

A traders will buy a One Touch CFD when there is a high probability of a major move in the stock market. This usually centres around geopolitical events or interest rate decisions. Back in 2008 when the markets where crashing, a One Touch CFD may have been a good bet.

The other limitation which makes one touch CFD hard to trade is that it is also a directional trade. It is different from the boundary options or high low options that some brokers offer.

How are One Touch Options Different Than Classic CFD?

The term “CFD” technically means a fixed rate of return. A fixed return option means that the potential profit or loss is a predetermined amount. Brokers of binary options give traders many different types of fixed return or CFD to use in trading the markets. The time frame in which the option expires in is a major factor. With a one touch option, as its name suggests, the underlying asset only needs to touch the target price. The asset can have a spike up / down. And hit its target price and still be profitable even if the prices moves back by the time the options expires.

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