It should first be stated that long-term binary options inherently come with a higher level of risk. This is simply because it can be tough to determine how an asset price might move over an extended period of time. Even so, those who are able to identify long-term price trends will be able to generate nice profits from these types of trades, and will also be able to spread their financial risk out over a longer period of time.
This binary options strategy can be extremely profitable, but will be more so for those who have at least minimal trade experience. Consider trading for several weeks before attempting to trade with long-term expiry times. This will allow you to get a good feel for how asset prices move, as well as for what to expect in regard to how certain events impact price movement. News trading is not really an option when selecting an extended expiry, but there should still be some understanding of how economic data and earnings reports impact asset values.
Some level of risk can be minimized by selecting the shorter of the available long-term options. Each broker will provide their own time-periods for these trades, ranging from one day to a full year. Clearly, patience will be required when opting for the longer periods. The benefits of selecting one of the shorter options will be the ability to fine-tune analysis, along with not tying up account funds for an extended period of time. Many simply do not want to wait months or a year to find out if they’ve earned money. A wait time of a day or week will be much more acceptable to these individuals.
This strategy will necessitate that fundamental and technical analysis are completed before making a decision. As mentioned above, fundamental analysis can be challenging, as it can be anyone’s guess what investors may be thinking far in advance. Then again, there are ways you can identify prospective asset price changes based upon certain events. For instance, should you plan to trade with a stock, you may not want the trade to be ending near the time of an associated earnings release. This type of information can significantly influence the price of a stock, and in doing so, could cause of loss if you’ve predicted the movement incorrectly.
Technical analysis will prove more beneficial in most cases. You need to know exactly what the average price is, in addition to knowing what the highest and lowest historical prices are. A number of questions must be answered, such as:
- What is the possibility of a reversal or breakout taking place? How volatile is the price of the asset typically?
- Is price movement typically brisk?
- What is the prevailing market sentiment?
- Could the price of a different asset impact the price of your chosen asset?
The more you know, the lower the overall level of risk will be.
Although they certainly do require some effort, long-term trades so hold appeal to many traders. There is much to be learned by studying price movement over a longer period of time. Most binary options brokers now offer extended expiry options, but some have removed them from their platform due to lack of interest. No doubt, the nearly instantaneous rewards that can come from short-term trades are appealing. Even so, there is no reason to overlook the potential rewards that can come from opting for contracts which do not expire quickly.