Perhaps one of the most popular ways of trading binary options online is trading on news and latest events. This is believed to be the easiest form of binary options trading available. After all, if a company released a new product today then all you have to do to predict that the stock prices of that company would go up, right? – Well, no. It’s actually a bit more complicated than that. In reality, trading on news is actually not recommended to newcomers.
Trading binary options on news is actually only recommended to medium to high skilled traders. This is because the value of an asset is usually the most volatile during an important even related to that asset. Newcomers will have a very hard time predicting the movement of the asset during special events. However, news binary options trading obviously remains one of the best ways to make money online in case you follow a few well-established guidelines. Read this article in order to learn how to trade binary options on news and other events.
As we know, with binary options, if we simplfy them, we have to choose only beetwen two options. One option is, if the asset will increase over a certain period of time and second option is, if the price of the specified asset will decrease in certain period of time. That is why it is good to keep an eye also on the news. You should always have open some trusted finance source of news since you never know when something new will come in.
Binary Options News Trading
Binary Options News Trading is actually not recommended to newcomers. If you are a newcomer you should perhaps try out some other binary options strategies first such as pinbar candlesticks and general considerations for money management. Predicting the movement of markets is almost impossible immediately before and immediately after the release of a major news or event that related to an underlying asset. Mostly only experienced traders are confident enough navigating though this net.
Sources of News
It is true that there is no such thing as too much when it comes to this but eventually you will have to pick few websites that you like otherwise you can read news your whole day and not trade. I would always suggest to read news and then check also technical analysis of that asset. If technical does not meet the fundamental as we call this part of news analysis, then i would not trade yet since technical analysis on chart is what is important and what you trade.
I would suggest that you start reading Bloomberg, The Economist and of course Wall Street Journal. These website are very well known in the industry along with Yahoo finance and several others. They are in constant motion as you and they even offer you analysis on what is going on, on the market. If you are a beginner i would suggest that you make a decision and only follow what you want to trade, so niche sites are also great idea since they will ofer you news based on what you want. For example, if you are into currencies then you must bookmark and check investing.com and also FXempire which is a great source for currency pairs and updates. Another example, if you want to trade oil, you have to be up to date on what is going on and therefore it is a must to read oil & gas journal.
What are the news sources
The bottom line is that you can never have too many news sources. Obviously, most news should be taken with a massive grain of salt, but following the market place will give you a direct source to real-life investment and how investors react at a given time.
Upheaval in the Middle East, presidential elections in Venezuela, natural disaster in Japan or economic meltdown in Greece will all – rest assured – have an impact on the global financial marketplace.
The usual suspects such as Bloomberg, The Economist and Wall Street Journal are all age-old, reliable and constantly updating news sites with fresh and insightful analysis on the markets. You should also rely on niche sites where single assets are monitored and discussed. If currencies are your cup of tea, check out investing.com or FxEmpire for updates and market reviews on major forex pairs. If your cup of tea is a barrel of oil then make sure to peruse the versatile content of Oil&Gas Journal.
Most binary options traders like to trade on short intervals meaning that long term financial trends are less relevant than when it comes to long term investments. Therefore the importance of monitoring the news, like your life depends on it, is the most important aspect of trading – otherwise your only friend is luck and luck always runs out.
Follow the News
The unpredictable and anarchic world of investment requires solid news sources that help you navigate the murky and the stormy waters of fast moving markets. Considering that Binary Options trading is still a relatively new form of investment, these waters can be extremely volatile.Considering the vast number of variables and different scenarios, it’s important to keep an eye on the news.
However, the timeless laws of finance and economics still apply. For instance, upheaval in the Middle East will likely impact the price of crude oil, the U.S. dollar and companies that operate in the regions where turmoil is taking place. When currency pairs such as EUR/USD are fluctuating investors often flock to gold, which is considered a safe haven asset. If South America is in the throes of floods or other natural disasters, investors can expect to see a spike in coffee prices because the supply decreases while demand is remaining steady.
Combine Intensity of News Trading
Unlike Forex, Binary Options trading follows a simple logic: The investor chooses between two dual outcomes: the underlying asset either increases or decreases within a specific time period. If you bet on gold going up in the next 15 minutes, then you win, if it doesn’t then you lose. In such a scenario, it is important to keep a keen eye on the news.
Following trusted financial tickers that monitor global markets is crucial. In other words, it would be wise to invest in an additional computer screen to have a constant and uninterrupted flow of news. You should also follow analysis and opinion pieces which offer insightful commentaries on the current political, financial or economic situation of a current country or region.
When the trading gets tough, the tough get tougher. This means that you should avoid panic at all costs and keep a cool head. In other words, follow the news, don’t be fooled into thinking you can predict the future. Just make sure to monitor the trend lines and news developments in real-time.
How to Efficiently Trade on News and Events
So, now you know during which time frames you should avoid trading. However, you still don’t know when you will have the best chances to cash in large amounts of money when trading on news and other kinds of events, like product launches of companies and more.
You will have the most optimal winning chances in binary options if you trade before 30 minutes after an event involving an asset takes place or 30 minutes after that event took place. Let us explain why this is so:
– 30 minutes before the event:
Before an event takes place, there is usually a general consensus about the nature of the event. For example, if Apple will in a few hours launch a new product then most people will assume that the product in question will be of good quality and bump the company’s stocks.
In this case, it’s very likely that the stock prices of Apple will increase during this time frame. You will be able to buy the appropriate option contracts in this situation. However, when only around 30 minutes remain before the product launch things will go crazy. People will begin to speculate, buy, sell, and the company’s stock prices will jump around heavily.
– 30 minutes after the event:
During the initial 30 minutes (while the event is most likely still ongoing) a lot of speculators are still actively trading, which results in the value of the asset jumping around all the time seemingly without any logic at all.
However, after the initial 30 minutes, the asset will stabilize and begin to either continually increase or decrease. This is because 30 minutes in the event (like a product launch, for example) people will already be able to evaluate the nature of the event.
Like, in our Apple example, 30 minutes into a product launch you will already be able to tell the quality of the product launched. If you see that the company released something great, you will know that the value of Apple’s stocks will increase.
If, however, the product sucks or nothing major was released, then you know that the value of the company will decrease. As such, you will be able to make the right predictions and earn a lot of money.
Binary Options News Trading Example
Here is an example of news trading in action. It is on the GBP/USD currency pair.
The market had tested and rejected the 1.70 level the previous day. However the price action retained a bullish bias. This was confirmed by a succession of higher highs and higher lows and rising moving averages.
The pair had also already tested support at 1.6994 earlier in the morning. With news due for release at 09:30 UK local time the bias was to send the pair higher through resistance level. Given the bullish momentum the trade was called higher to good effect.
Two Call trades were placed – an hourly contact and a contract to expire at the end of the day. Both came in for profit.
If the outlook had been less clear we could have traded the same news event using a ‘Boundary contract’. With this contract we can set up two separate price barriers to form an upper and lower range. This is a particularly good strategy to use on higher volatility news items where price action is likely to move sufficiently at the time of the news release to trip either the higher or lower barrier. In this scenario the ultimate direction of movement is less important as you are simply trading the volatility.
Trading on news involving currencies
This report always influences the conversion rate of the USD compared to other currencies. There are basically two scenarios to take into consideration here:
– A lot of new jobs were created the month before:
The USD will increase in value. In this case, you should make a predicting according to which the USD/xxx (xxx as in any other currency) exchange rate will decrease, since the USD became stronger due to the consequence that more investors invested in the USD knowing that the US economy was boosted last month by the new jobs.
– A lot of jobs have been lost the month before:
In this case, the value of the USD will drop due to the fact that the loss of jobs pointed out a stagnation/decrease in economic output. In this case, you should buy a binary options contract that predicts that the value of the USD/xxx exchange rate increases (meaning the USD will perform poor).
Trading news on stocks
If, the general consensus thinks that the next product launch of a company will be successful, then the stocks of that company are expected to increase.
If, around 30 minutes after the product launch it becomes evident that the new product launched is great, then the value of the company will naturally increase. You will have a very easy time making a good prediction in these cases.
But like said, just avoid trading either 30 or 15 minutes before a product launch and 15 or 30 minutes after a product launch. This advice is extremely important.
Points to Consider for Binary Options News Trading
There are a number of things to consider before jumping ahead with this strategy.
Trading the news requires a lot of pre-planning. You need to work through the trading process prior to the event. This will help you when news hits the markets as you will know exactly the course of action you are going to take.
You should work out the trigger level that you will use to enter the market, the contract that you are going to place and the expiry time that you are going to set.
You need to show trading discipline. As the work is carried out prior to the news event you should only ever be executing your orders. This means that you stick to your plan and avoid making any rash decisions in the heat of the moment.
Also depending on what news you are trading, you should also ensure that you don’t end up over exposing yourself.
If you are trading a major global news events such as the Non Farm Payrolls (NFP) always look to limit your total trading risk. Avoid pairs that may show a correlation in movement as a result of the news or data. Being overly exposed at these times can quickly cause you to compound your losses. It is therefore important to remain aware of the impact of volatility that surrounds such events.
The bottom line
when it comes to binary options news trading, what we’re looking at are a handful of rather straightforward strategies, each of which effectively covers a well-defined scenario:
– the Put/Call trade on assets the price-movement direction of which is relatively easy to predict (the currency interest-rate change announcements offer a good example in this respect).
– trading the volatility (a technique which calls for a range/outside approach, and which works with news that induce volatility but no clear direction in the asset-price)
– price-rebound trading. Often, economic news will create volatility in an asset-price, which will later settle. Such asset-price rebounds can obviously be exploited through binary options as well.