Trading currencies has been with us for a long time. Binary options trading is a fairly new frontier considering that it has not reached its peak yet; it is still in the growth phase as there are many people all over the world who do not even know it exists. For those in it, it a good way to make money by making trades from their shifting values in relation to one another.
In many cases, we find currency quotes going up. For example, while considering the base currency like the U.S. dollar and the currency quote escalates, it signifies the appreciation in the value of the U.S. dollar and the relative weakening of the other currency. A lower quote indicates the weakening of the base price. As per the Bretton Woods agreement, US dollar is the world’s reserve currency, and this is the reason it is common in major currency pairs.
The value of a currency is always determined by its comparison to another currency. By definition, a currency pair denotes two different currencies with one currency quoted regarding the other. The first currency is termed as the base currency and the second currency is the quote currency. The base currency’s value is always unity. There are many currency pairs expressed regarding dollars, with $1 USD acting as the base currency.There is a standardization in naming the currency pair. The most commonly traded currency pair is the U.S. dollar and the euro. It is listed as EUR/USD and never the reverse order. The purpose of formulating such pairs is to show the amount of quote currency required to purchase one unit of base currency.
Binary Option Trading Currency Trends
When traders use currency pairs in binary options trading, they benefit from the performance of two currencies and two economies, adding a global element to the trader’s experience. Using currency pairs is one of the dynamic ways to involve binary options traders in the market. This involvement results from the constant change in the values of the currencies. The binary options trading uses currencies as an essential asset choice. Trading of currencies in the binary options market is much easier than trading on the Forex market. They reap benefits too. They provide the much-needed access to the international financial markets. The traders can acquire an exact estimate of their income. If we mix forex and binary options trading, we can fully exploit the market potentials take advantage of trading techniques as well. There has always been a worldwide debate about the best currency pair to trade with. The question sometimes loses its relevance as each currency pair is an independent entity. Deciding on the best currency pair primarily depends on the traders’ personal advantage. The selection is also dependent on the preference given to the time of the trade. Apart from the technical analysis as preferred by many traders, there are several fundamental factors that have a major impact on certain currency pairs. The impact sometimes is so severe that pure technicians mostly abstain from trading during days when important economic data, especially from the United States, are due to be released. These factors include the unemployment data, housing data, customer confidence reports, inflation reports, manufacturing and services purchasing managers’ indexes, retail sales, central banks’ interest rate decisions and GDP numbers.
What Is a Trending Market?
Before I show you some examples, please let me have a short short introduction about trend.
There are two kinds of trends: Uptrend and Downtrend
Uptrend form when price goes up and forms higher lows. So this is an uptrend:
You may ask why we don’t say we have an uptrend when price goes up and forms higher highs. As you can see on the above example, there are “lower highs” in an uptrend also, but the strength of an uptrend is in forming lows that are higher than the previous lows. It means when the price goes down and forms a low, it has to be higher than the previous low.
Downtrends form when price goes down and forms lower highs. So this is a downtrend:
Different Currency Pairs and their impact on Binary Options Trading
The most advanced economies in the world offer currencies that need to be focussed on. They are analyzed by experts and some of the biggest companies on the planet operate their main offices in these countries. There are some frequently used currency pairs that are listed below. Here, USD stands for the United States Dollar, GBP for the British Pound, EUR for the European Union Euro, CAD is the Canadian Dollar, JPY is the Japanese yen and AUD stands for the Australian dollar.
The EUR/USD currency pair has the best liquidity and the highest order flow in the entire market. There is the minimum possibility of a slippage, and the trades are executed immediately. The amount of volatility is lower as in the case of EUR/USD currency pairs. While this particular pair has relatively slow movement as compared to other major pairs, then this pair becomes extremely suitable for beginners in binary options trading.
The GBP/JPY pair is very volatile. It suits only to experienced binary options traders. The presence of volatility is experienced more in times when the Japanese government publishes new economic data which causes uncontrolled movement in the currency values.
3. AUD/USD and USD/CAD
The AUD/USD and USD/CAD are also known as commodity currency pairs. The prices of the currencies have a strong dependence on the prices of oil and gold in the international market. The liquidity of these pairs is comparatively lesser than that of EUR/USD pair. Therefore, the pairs bear less predictability and may sometimes lead to unexpected reversals.
The GBP/USD is a very stable currency pair, especially for beginners to the binary options trading arena. The pair has good liquidity and movements.
The volatility of this pair is intermediate of EUR/USD and GBP/JPY.
Most Predictable Currency Pairs of 2016
- AUD/USD: This currency enjoyed predictable behavior while it was trending down and has the capacity to respect support and resistance lines. When the pair posts higher highs, it trends up, and when it posts lower highs, the direction is down. This textbook behavior in channels and ranges is set to continue.
- GBP/USD: Cable usually suffers stronger and sometimes more violent moves than EUR/USD but these are becoming smoother, placing the pair higher in the list. One of the reasons for the more predictable behavior is the fact that both the BOE and the Fed are set to tighten. This certainly doesn’t mean that ranges are small: they are still wide but are just more respectful to technical lines. Note that when we have a breakout, the pair marks the edge of the next range before ranging within it.
- NZD/USD: For those that do prefer narrower ranges, the kiwi often provides opportunities, especially if you look back on the charts: the kiwi has a good memory for old technical lines as well as new ones. This is set to continue.
- USD/CAD: Often overlooked by traders, this pair returns to the list. The huge volatility in oil prices, which is set to continue, has contributed to bigger movements and better predictability for the pair. The pair has a tendency to bounce first, break later when it encounters big lines.
- EUR/USD: The world’s most popular pair has enjoyed nice behavior in Q4, amid a clear trending lower. And while it remains on the list, it falls to the last place. The specter of QE in the euro-zone is a game changer and could trigger unexpected behavior. The general trend is down, but the path is set to be more bumpy. This pair could be goof for a longer term position, but could be harder to trade in shorter terms.
Methods to choose the currency pair for Binary Option Trading
There are two different methods to choose the currency pair. The first method is to watch out watching for the economic calendar for the upcoming days. The traders usually keep an eye on currencies whose countries are expected to make significant economic announcements. The trader enters a trade based on his intuition or evidence showing a particular trend. The other method is to look at charts and pinpoint any pattern or trends that cannot me missed out. This decision should be backed with appropriate fundamentals, technical and sentimental analysis.
Traders should invest in currencies that are based on flourishing economies or such economics that show a constant progress financial markets. It is considered as the best approach to reap maximum profits and minimize losses. When traders deal with popular currency pairs, they become a part of a big commercial team, and they get benefitted by exchanging a lot of valuable financial information. Trading with the popular currencies does not imply that the other currencies should be neglected. A proper research may lead to attractive currency pairs that can bring great returns on the investments. While executing trades in binary options trading, the trader should have an understanding of how the currencies in the pair compare against each other. It is always important to know the strengths and weaknesses of each currency. The state of the overall economy that backs the particular currency should also be considered. Once the relationship between the currencies is understood, the trader should have distinct abilities to make predictions make a prediction on whether this relationship will rise or fall over the short term. Currency pairs trading is an excellent way to become better at binary options trading. However, it is more important to develop the skills and improve on aspects of knowledge. This includes a greater investment of time, reading of literature, analysis of strategies and the art of exploiting the tools to one’s benefit. The financial world is too dynamic, and it suffers from constant changes. The traders need to be well prepared, and they should follow the highs and lows of the markets judiciously. The beginner should consider investing in the most common and the most popular currency pairs. It is the best way to initiate as a trader and analyze the financial environment. Subsequently, as the trader gains experience, they should start searching for new pairs that can bring great returns.
Make Money Trading EUR/USD?
EUR/USD pair Considerations
This is the most traded pair in binary options trading today and trend looks likely to continue for the foreseeable future. It juxtaposes the Us Dollar against the EU Euro. The two are the most liquid currencies today in the global currency markets and this adds to their popularity with binary options traders. The two are also the most traded currencies in the traditional forex markets.
Since you cannot trade blindly or make guesses on which way to trade this pair, there are a few general factors that you should take into consideration. This is before considering the other more specific news and events that can influence price changes. These factors are:
- Trading time differences make binary options trading tricky and interesting at the same time. The North Atlantic trading sessions open a good number of hours after the Asian markets open. This means that if you are trading in the American and the European session you need to make short expiry times with this pair while avoiding the Asian currencies or making longer expiry times over short ones with this group.
- The Asian session is usually a little slow for the American and European currencies. This means you should take longer expiry times on this pair.
Price shifts in the EUR/USD pair
People always talk about how one currency can sneeze and another thousands of miles away catches a cold. This is true with the EUR/USD pair, but the analogy of sneezes and colds is not something that happens all the time. Economic news out of both Europe and the US will not make big changes in the pair, but there will be changes all the same and traders can make trades with these changes which will change from time to time according to what is happening in both economic zones. The fortunes of those countries’ economies are hardly recognizable from daily news unless there are major events with a significance implication to those two economic zones.
What brings out more pronounced changes is the economic releases or announcements by various bodies in both zones about key economic performance indicators like changes in interest rates, unemployment figures, changes in value of production, consumption and exports.
Key economic releases to watch in Europe
Among the key releases that you should watch out for in Europe that are likely to cause some changes in the values of the EUR/USD are the following:
- Consumer Price Index (CPI): This is the most important performance indicator to come from the Eurozone. It is a report on the situation in Eurozone as regards inflation and what the European Central Bank (ECB) is doing to support positive results or to counter negative results. It is the main determinant of what the ECB will do to shape the short-term and long-term monetary policy.
- Purchasing Manager Index (PMI): This indictor will show the performance of a sector in terms of expansion and contraction. This will influence ECB’s decisions arising from the data.
- Gross Domestic Product (GDP): This release follows a meeting of top Eurozone economists every month and the data from such meetings shows the relative situation in the Eurozone economies.
- Unemployment figures: These too are performance indicators. An increase in new jobs or their retention is a good indicator while loss of jobs and increased unemployment rates is not.
Key economic releases to watch in United States
The US economy is the largest in the world and so it is expected that there will be many releases on the state of the economy and its various sectors each and every month. These releases are also expected to have an effect in global indices as well as the currency markets including the EUR/USD pairings. These are the key releases you should watch out for:
- Interest rates: There is always excitement and consternation in equal measure every time an announcement on the raising or reducing interest rates is imminent. The announcement usually causes movements in price as traders shift positions on the likely outcomes.
- Jobs data: Unemployment rates, job losses and creation of new jobs are key indicators of the state of the economy and this will influences the dollar value in relation to the Euro and other currencies as well. This is especially so for the Non-Farm Payrolls data.
- Consumer Price Index: As in Europe, this release is important too as an indicator of the state of the economy.
- Others: Other important releases to watch are: Retail Sales, Institute for Supply Management, GDP, Producer Price Index, Durable Goods Orders, and other releases.
All these releases assist traders to make informed choices when they are trading the EUR/USD pairs. Of importance is any release by the ECB and the Federal Reserve.
The behavior of the EUR/USD in relation to releases, news and events
Market volatility is to be expected at all times. It is only the level that changes between high and low. There many factors that determine how the EUR/USD pair behaves and this will include the time the release, news or event happens, the reasons for their happening and the financial implications of such factors. These are what you will need to collate, synthesize and analyze to enable you to come up with more winning trades than losing ones on this pair, and this is essence of all binary options trading.
Make Money Trading GBP/USD pair
GBP/USD pair Considerations
The GBP/USD pair, otherwise known as the “cable” may prove to be a tough pair to be traded since it seems like it lives its environment. The cable pair is one of the oldest and popular currency pairing. The word cable originates from the first transatlantic cable laid underground between Europe and North America. This cable was meant to transfer exchange rate between Europe and North America. The cable pair accounts for the total volume of 17% of entire forex trading.
The most vital things to remember when trading binary options at the cable pair are subsequent:
- Try and keep away from the Asian consultation as the pair is transferring particularly within the EU and US consultation;
- Search for the pair to react while Retail income and GDP in the UK are introduced as it movements extra on that news than other currencies are doing;
- When GDP is announced in the UK look for the initial release as the market is barely transferring while the second one estimate is published;
- Look on the financial calendar for the dates while relevant banks are putting the interest rates as Central Bank of England is assembling on a monthly basis whereas Federal Reserve within the United States is meeting every six weeks. Currencies are shifting based totally on the interest fee choices and financial rules of Central Banks.
Vital economic Releases to look at in the UK
- UnitedKingdom is one of the crucial economies in the world and the currency, the high-quality Britain pound, is hardly encouraged while the financial news is being launched.
- Even though the United Kingdom is a member of the EU Union, it’s miles worth citing because it is not having the Euro as foreign money, so it isn’t a part of the Eurozone.
- The Bank of England, which is also the Central Bank, has the mandate, is to hold inflation at around two percent. So as to deal with that mandate, the MPC (financial policy Committee) is gathering on a monthly basis to evaluate the economy.
- The MPC assembly is not accompanied by a press conference like in the case of the European Central Bank (ECB) but the opposite will happen if only the interest rates are changed.
- The GBP is strongly stimulated when the GDP is being released (Gross Domestic Product) and the initial release is the most critical one because it is the last one and is not easily separated. Besides GDP, Retail income and PMI’s (shopping supervisor Index) have the power to move markets in addition to the CPI (consumer price Index) or inflation. In truth, inflation is at the top priorities listing of the central bank of England has and when the Inflation Letter is released markets are shifting quite aggressively.
- At the PMI fact, it’s far worth mentioning that they’re being split inside the provider, production, and manufacturing sectors.
Essential financial Releases to look at In America
- Concerning U.S.A., we should start with the fact that this is the biggest economy within the global and it is understood that loads of critical financial news are being released each and every month.
- Because the significant bank of America, the Federal Reserve, is having a dual mandate, it’s miles obvious that jobs facts (Non-Farm Payrolls) and inflation (CPI) are the ones that virtually count. But, there are some different pieces of financial releases that influence markets, as follows: ISM (Institute for Supply Management) production and Non-production (those are the equivalent of Europe’s PMI’s stated a chunk earlier, Retail sales (released on a month-to-month foundation), GDP (launch on a quarterly basis), PPI (manufacturer fee Index), ADP (personal payrolls), durable items Orders, etc.
What are the things to be expected from economic releases?
- The first thing that is to be expected is the move of GBPUSD when Non-Farm Payrolls in the U.S and also Claimant Count in the UK are being announced since job growth is a key factor the central bank of England considers most.
- Also, the PMI and ISM are displaying expansionary or contractionary situations for services, production and creation sectors, and this interprets in the market looking to form an opinion regarding what is going to occur the subsequent time when the imperative financial institution is meeting.
- FOMC (Federal Open market Committee) is meeting each six weeks, and forward guidance and monetary projections are being posted as well as a press convention each 2-3 conferences. All through these occasions, the USA dollar is shifting sharply and thus all US greenback related currency pairs are transferring as accurately, GBPUSD included.
- More details about the way to exchange this currency pair are to be located out using watching the two recordings above as we’ll talk the economic calendar in greater details and the way to evaluate two economies while it comes to taking a trading decision.
- The cable is widely known to be negatively correlated to different currency pair likeUSD/CHF and also positively to EUR/USD. The reason behind this is that the Swiss franc, the Euro and the pound have a positive correlation with each other.
- Since cable accounts for a larger percentage of all forex trading, all things that happen in both UK and United States of America are keenly followed because a slight change will have a big impact in forex trading as a whole. So when trading this currency you need to follow crossly what happens in the UK and United States.
Make Money Trading AUD/USD Pair
AUD/USD pair Considerations
The AUD USD pair is also known as the Aussie; this pair is quite an interesting forex pair. It’s far extraordinarily depending on what is happening in each of the commodity markets and in China.
- It is a rather unstable pair as it depends on many portions of statistics information. This indicates you need to look carefully what expiration date you’re deciding on.
- Chinese data, such as PMI’s and GDP, as well as inflation ranges and financial coverage in China due to the heavy members of the family between the two economies.
- The other thing is central bank interest rates. The Reserve Bank of Australia (RBA) assembles on a month-to-month basis whereas the Federal Reserve in the America is gathering each six weeks.
Critical economic Releases to watch In Australia
- AS stated above, Australian economy is quite dependent on what’s going on with the Chinese economic system and with commodity costs so if something, one must recognize all the time what the Chinese economy is doing and the way gold, platinum, palladium, copper, iron, etc. are trading as they will have a robust effect on the AUDUSD pair.
- Besides that, PMI’s (buying manager Index) releases are coming in 3 special components, one for each area: offerings, production, and manufacturing. Any launch above the fifty level shows bullish conditions for the arena at the same time as a dip under fifty signals issues as the recession is showing its enamel.
- Employment information and GDP (Gross Domestic Product) also are key monetary releases. However, greater essential in the Australian dollar case are relevant bank’s interventions as recent examples show
- Governor making dovish statements regarding the Australian dollar and even giving goals for the appropriate value and markets are taking them as granted.
Crucial economic Releases to observe In USA
- About U.S.A., we must begin with the fact that is the most important economic system in the world, and it is going without saying that a whole lot of substantial monetary information are being released each and each month.
- Because the Central Bank of America, the Federal Reserve, is having a dual mandate, it’s miles obvious that jobs records (Non-Farm Payrolls) and inflation (CPI) are the ones that sincerely matter. But, there are some other pieces of reports that affect markets, as follows: ISM (Institute for Supply control) production and Non-manufacturing (those are the equivalent of Europe’s PMI’s noted a piece in advance, Retail income (launched on a month-to-month basis), GDP (start on a quarterly basis), PPI (producer charge Index), ADP (non-public payrolls), long-lasting goods Orders, and many others.
What to anticipate From Financial Releases
- We expect the marketplace to move fastest while CPI (patron fee index – inflation) is being released as this is the one commercial launch that makes a critical financial institution shifting on interest costs. Also, we anticipate the number of volatility to surround RBA (Reserve Bank of Australia) interest charge decisions and to gather as the Central Bank is assembling on a monthly foundation to evaluate the financial state of affairs in Australia.
- RBA has a responsibility to keep inflation below two percentages, as, like every other important vital bank inside the world, the commission calls for inflation to be saved under or near two percent. In other words, pay interest while inflation is being launched as if it’s far coming far from the stated goal, the crucial financial institution will do all in its powers to ensure the mandate is fulfilled.
- GDP of a route that topics as it matters in any economy and besides, the Retail income also provide a glimpse inside the customer electricity as consumer spending is the very engine of the boom in any economy.
- Federal Open market Committee (FOMC) is meeting every six weeks, and forward guidance and financial projections are being reported as well as a press conferences every 2-3 meetings. For theduration of those occasions, the United States dollar is moving sharply and for that reason all US dollar related forex pairs are moving as nicely, AUDUSD included.
- Because the U.S. Federal Reserve tends to mediate where the interest rate is worried, the currency market due to of this witnesses a scenario wherein the value of AUD USD pair is going down because of consolidation and strengthening of USD.
- Traders must also remember the fact that the Aussie shares adverse or negative correlation with USDCHF, USDCAD, and dollar-Yen pairs.
- The AUD USD enjoys a positive association with the USDCAD, because of the reality that the great correlation exists between the Canadian dollar and the Australian dollar on account that each those economies are comparable in structure and additionally due to their dependence on resources that’s a driving force in the back of the GDP.
- To gain more understanding of the tips and tricks, it is helpful to watch for the economic releases based on the economic calendar and divide them according to the importance. Expertise fundamental analysis is crucial on the subject of successfully buying and selling financial markets.
Make Money Trading USD/CAD
USD/CAD pair Considerations
This is a currency pair that is unique and crucial because the Canadian economy is a particular one because it determines what’s going on in the commodity markets, especially the oil market. Canada is among big producers and participant in the oil market. When the price of oil fluctuates, they will have an impact on the trading of the USDCAD pair.
The Loonie pair represents neighboring countries with a common border; the USDCAD is being considered as a forex pair that reflects the differences between the United States and Canadian economies. However, oil ought to be crammed into the equation as, again, since it keeps the pair moving.
What are the things to consider when buying and selling binary options when using the Loonie pairs as an asset?
i.) Oil Inventories– Look on the financial calendar for when the oil inventories are launched as higher inventories mean oil value is turning down, and therefore, CAD should turn lower. Accordingly, the USDCAD pair must flow to the upside and call alternatives have to be traded. The opposite is actual for placed options.
ii.) OPEC meetings– The Vienna meetings are continually transferring the oil marketplace and implicitly the Loonie pair.
iii.) The Decision of the central bank based on interest rates- Federal Reserve in the u.S. conducts a meeting in every six weeks while the Bank of Canada meets on a month-to-month basis. Press conferences follow the bank of Canada interest charge selections.
Vital monetary Releases to look at in Canada
- As noted above, the whole lot associated with the oil industry, like US rigs count number, levels of inventories, OPEC conferences, OPEC manufacturing degrees, etc., record every USDCAD dealer must recognize while are going to be launched because the pair will circulate sharply on this release.
- Ivey PMI in Canada is the best PMI that is calculated (if you compare it with US, Australia, Europe and where at least two are used) and it’s far important as being an unmarried launch. It is showing the kingdom of the financial system, if it’s far increasing or contracting, with the 50 degrees being the road in the sand among contraction and enlargement, or recession or boom.
- The classical releases must be monitored in the same manner like the Retail sales, GDP (Gross Domestic Product), manufacturing information, and so on, but if I decide to pick the most decisive factor outside Bank of Canada interest rates choices, am sure it will be oil.
- Speaking of the Bank of Canada, any assembly is being accompanied by a press conference and at some point of the clicking convention questions are being raised and consequently volatility keeps growing.
Critical monetary Releases to watch in the USA
- when we are talking about the United States of America, we must bear in mind that this is the largest economy in the world and it is going without mentioning that wide range of crucial economic information are being launched each and each month.
- Because the Central Bank of United States, the Federal Reserve, is having a joint mandate, it is apparent that jobs records (Non-Farm Payrolls) and inflation (CPI) are those that honestly matter. However, some different economic releases influence markets. They include Institute of supply management (ISM) production and Non-production (those are the equivalent of Europe’s PMI’s cited a piece earlier, Retail sales that are released on a month-to-month foundation, GDP launch on after every three month basis, Producer price Index (PPI), ADP (personal payrolls), durable items Orders, etc.
What are the things that we should expect from these economic Releases?
- Among the things we should expect from these economic releases are a lot of volatility especially when the Bank of Canada will meet and when the press conference starts. Any decision based on interest rates will be nullified during the press conference to follow. The market is likely to follow the conference and not the interest rates decisions. The market will follow the decision of interest rates if only they are in conjunction with the decisions of the conference.
- For example, let us imagine that Bank of Canada is cutting the prices on the back of lower inflation stages, and hence the USDCAD pair is transferring lower. However, at the press conference the Governor can also say; the central bank is looking for inflation to start later in the year and similar to that the USDCAD will gain support on any dip lower and subsequently will opposite route. It is worth noting that the USDCAD is a currency pair referred to as having low liquidity, and this means movements are sharp and robust, leaving no room for mistakes when a trading selection is being made.
- Federal Open market Committee (FOMC) is assembly each six weeks and ahead steering and economic projections are being posted in addition to a press conference each 2-three meetings. During these activities, the United States dollar is shifting sharply and accordingly all US dollar associated forex pairs are transferring as well, USDCAD covered.
- Like another currency pair, the Loonie is highly affected by external factors that interfere with the value of the individual currency value. The Loonie will fluctuate if the Federal Reserve and the Bank of Canada interest rates do not favor it. So trading of this pair requires one to pay cross attention to every detail.
- The two nations have experienced changes in their relationships over the past years. Recently the United States began to implement programs that are aimed at restoring its economy. Therefore, it will be an interesting scenario to see how the Loonie responds to these measures.