The long-shot strategy in binary options trading is linked to increase in risk levels and high payout ratios. Traders make use of this strategy to place a trade as it enables them to get impressive results with just a few trades. It can also help safeguard the investments that have been made by the trader. It can be used successfully using any of the underlying assets that the broker supports.
Trades that have predetermined target prices are executed and placed in such a way that they are some distance away from the opening value.
The distance between the opening and target prices is proportionate to the pay offs you get from using this strategy.
The risk of the trade increases substantially when the target price goes far off from the opening price.
The chance that the position may expire out of the money increases substantially when the price goes further away from the target before expiry period.
The trader needs to generate a number of small wins, so that they can get a good profit.
Trading long shot
Traders can choose to use this strategy when the market conditions are volatile, as it ensures huge price surges.
Many binary options traders consider applying this after the release of a major economic data or news that has a significant impact on the market. Although most major economic data is released on specific dates of the year there are some that may be announced suddenly by the government agencies or banks.
As the underlying asset may not have been priced for such events, you may see investors making some quick trades so that they are able to adjust their portfolios depending on the changing market conditions.
The markets may see spikes in the price of assets that are been traded. The sudden increase in prices provides an ideal situation for the trader to use this strategy.
The trader can choose to initiate such a technique after they have identified a target level price that the underlying asset may have to touch at least once before expiry period.
The size of payout ratio is the distance between the opening value and the target level of the binary option.
The returns on the investment may increase in proportion to the length of the distance that has been specified.
Technical analysis can be used by the trader to determine the target price and expiry times.
When you compare this strategy with others that are used for trading in binary options, you may find that it is risky but the payoffs can get very high. You can make use of the touch option to place a trade. Depending on the size of your investment, you can choose the put option. The long-shot strategy terminates at the time of expiry.