How Higher/Lower trades work: stake, expiry, payout and settlement

A Higher/Lower trade is a question with two possible answers: will the price of an instrument be above or below its current level at a specific moment in the future? You pick the instrument, the amount, the expiry and the direction. If you are right at expiry, you get your stake back plus a fixed percentage of it. If you are wrong, you lose the stake. That is the whole product, and the details below are where the useful understanding lives.

This kind of contract is often called a digital or binary option, because the outcome is one of two fixed results rather than a profit that grows with the size of the move.

The five inputs of every trade

Before a trade exists, you make five decisions.

1. Instrument. A currency pair such as EUR/USD, or an OTC instrument. Each instrument shows its current payout percentage in the picker before you trade.
2. Stake. The amount you put on the trade, from $1 to $50,000 by default. The stake is also your maximum possible loss on that trade.
3. Expiry. How long the trade lives, from 5 seconds to 4 hours. On market (non-OTC) currency pairs the shortest expiry is 30 seconds.
4. Direction. Higher (the Buy button) if you think the price will finish above the entry price, Lower (the Sell button) if you think it will finish below.
5. Timing. The moment you press the button. The server records the entry price at the moment it opens your trade.

What happens when you press Buy or Sell

On Sky Trade the trade is opened and closed by the server, at the server's price and the server's time. Your browser sends the request; the server fixes the entry price, the payout percentage and the expiry moment. Every device looking at that instrument sees the same chart, so there is no separate "your price" and "my price".

The payout percentage is locked in when the trade opens. Payouts on an instrument drift slowly over time, but once your trade is running, a later change does not affect it.

At expiry the server compares the closing price with the entry price:

• Win: the price finished beyond the entry price in your direction. You receive the stake plus the payout percentage of the stake.
• Loss: the price finished on the other side. You lose the stake.
• Tie: the price is exactly equal to the entry price. The stake is refunded.

Only the price at the expiry moment matters. If EUR/USD spends 55 seconds of a 60-second trade above your entry and dips below it in the last second, the trade is a loss. The path does not count, only the final point.

A full worked example

Here is an illustrative trade with round numbers.

• Instrument: EUR/USD, payout shown as 85%
• Stake: $20
• Direction: Higher
• Expiry: 1 minute
• Entry price recorded by the server: 1.08452

Three possible endings:

Notice the asymmetry. When you win, you make $17. When you lose, you lose $20. A win and a loss do not cancel out; one of each leaves you $3 down. This is the most important number in the whole product and it deserves its own article: see why most beginners lose.

You can run your own numbers with the profit calculator.

What "payout %" really means

The payout percentage is the profit on a winning trade as a share of the stake. At 85% a $100 winning trade earns $85 of profit, and you get $185 back in total. It is not the probability of winning and it says nothing about how likely the trade is to succeed.

On Sky Trade payouts range from 20% to 94%. Market currency pairs top out at 92%. Among OTC instruments, two hold the maximum 94% at any given moment, and these leaders rotate every 25 minutes. An administrator may also cap an instrument's payout or temporarily disable an instrument.

Because the payout is always below 100%, you need to win more than half of your trades just to stay level. At 85% the break-even win rate is 1 / 1.85, about 54.1%.

You cannot lose more than the stake

A Higher/Lower trade has a fixed downside. If you stake $20, the worst case is losing $20, however far the price moves against you. There is no margin call, no negative balance from a single trade, and no stop-loss to set.

That is genuinely useful, but do not confuse "limited per trade" with "limited overall". Ten $20 losses in a row is $200, and short expiries make it easy to place many trades quickly. You can have up to 20 open trades at the same time, which is a technical limit, not a recommendation. Sizing is covered in risk per trade.

Duration versus clock-time expiry

Sky Trade offers two ways to set the expiry.

By duration. You choose a length from the presets: 5s, 10s, 15s, 30s, 1m, 2m, 3m, 5m, 10m, 15m, 30m, 45m, 1h, 2h or 4h. The clock starts when the server opens the trade. A 5-minute trade opened at 14:31:12 expires at 14:36:12.

By clock time. You choose a moment on the clock, "close at" a specific time. If you set 14:35:00 and open the trade at 14:31:12, it lives 3 minutes 48 seconds. Open the same setting at 14:33:40 and it lives only 1 minute 20 seconds.

Duration mode gives every trade the same length, which keeps your results comparable. Clock-time mode is handy when you want a trade to end exactly when a candle closes, for example at the close of a 5-minute bar. Just remember that the actual length shrinks the later you enter. How to pick a sensible length at all is the subject of choosing expiry time.

Market pairs and OTC instruments

Market pairs use real interbank quotes and are available while the forex market is open, Monday to Friday. If no fresh real quote has arrived for 2 minutes (weekends, holidays or a feed outage), the platform refuses new trades with "market for this pair is closed".

OTC instruments are different: their prices are generated by Sky Trade's server and do not track any real market, and they are available 24/7. The mechanics of a trade are identical, but what drives the price is not. The full story is in OTC explained.