Economic News for Binary Options Trading

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Learning to use the Economic calendar in binary options trading

The economic calendar is a systematized resource in which to store information about the world news of the economy, finance, indicators of the movement of economic trends, data on events in the world’s largest markets. Also, as a rule, these sites contain a lot of statistical information, as well as many indexes and indicators that will be useful for each trader.

How to use the economic calendar

Any economic calendar carries in itself useful information that you need to learn how to apply correctly. But, in order to apply it, you first need to learn how to correctly filter these data for our needs.

In trading binary options, owning an economic calendar will quickly help you master the basics of trading knowledge with binary options.

To use it, you will need to learn how to segment information by date, country, level of importance, and other useful categories.

One of the most notorious strategies that have been used in trading binary options relate to forecasts of volatility. This is a very good thing that will help manage your risks even better. Now let’s talk about the news. Orient an unprepared person in the economic calendar will not be so easy. But everyone can learn.

On an example we will select the most important moments of orientation on an economic calendar:

– The most important news is highlighted by three special symbols. They symbolize the news with the highest level of volatility.

– News that do not carry a particular importance is highlighted with one special symbol.

– Each economic report is marked with “optimal values”, which is indicated when the data given correspond to the norm for the reported indicators.

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– Comparison of expected and actual results. And also the comparison of data with the levels of historical highs and lows.

– Track economic reports and news for certain countries, they will affect the currency pairs that are of interest in trading binary options.

– The reaction of the market to this or that news will be a signal to the trader for binary options to open new positions.

There are different opinions about these news from traders by binary options and not only by them.

– In the first case, traders recommend to extract from such news a maximum, proceeding to trade based on the so-called newsfactor.

– In the second case, traders recommend waiting for a favorable environment, when the news factor will not affect the process of trading binary options.

Do not forget that you can not focus on the news factor fully, because there are many other factors that affect the binary options trade in general. The news factor has a high level of unpredictability and volatility. Rely only on it is not worth it.

The most valuable events in the economic calendar

These are the messages that provoke fluctuations in the exchange rate of 75-155 points within a short period of time. The rest of the news of the economic calendar does not have such a strong impact on the market.

Appointment of the head of the Central Bank

For each country, this event brings with it changes in the financial policy of the country. What they will be – all this will depend on the elected head and the vector in which he will implement political reforms. The interest rate is one of the key economic factors, which can be affected by the decision and policy of the new head of the central bank. The change in the interest rate level, as a rule, will immediately become known after the meeting of representatives of the Central Bank.

Press conference

At a press conference, the leaders of the Central Bank provide general information on the situation that has developed to date.

The minutes of the meeting of the CEOs of the Central Bank

This information gives the trader a better understanding of what is happening, after the Central Bank has solved the problems for a short term. In voyu turn, it gives an opportunity to understand in what direction a long-term solution will be made.

Changes in the interest rate level

This phenomenon occurs as a result of previous factors. Also, interest rates are influenced by GDP and other indices, which reflect the level of the economy in the country. The lower the interest rate level, the better the level of economy in the country is expected to be.

The rate of inflation

The level of inflation reflects the general welfare and general level of purchasing power of citizens of the country. The lower it is, the more valuable the money. This, in turn, does not allow the money to depreciate. The state also has its own advantage, since people can spend more money. Taxation only benefits from this.

Gross domestic product

It is the equivalent of all services and goods that are produced within a particular country in a certain period of time. The higher this indicator, the better the level of the economy in this country. Excessively large values ​​of this indicator can provoke a sharp drop in GDP.

Labor market

The labor market can have different values ​​from deficit to surplus. These two phenomena can be displayed both by employers and by workers. The state always strives to keep this market within certain limits. Since, lack of jobs as well as their excess can lead to not the best results.

What we have in the end

The news factor is actively used by a large number of traders. Many of them have learned to turn this factor into the secret of success in trading binary options. This factor can successfully diversify risks when trading binary options. And also, it is perfect as a comparator when applying certain trading schemes.

“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”

NOTE: This article/material is not an investment advice.

Using Binary Options To Trade Economic Events

The market is moved by news events. When the FOMC speaks about happenings with the Fed Funds, traders are all ears trying to gauge which way the market is going to move. These movements have an impact on the way traders trade different markets.

The Federal Funds Rate is the interest rate institutions use when lending amongst themselves. The actual rate is determined in the open market, but the FOMC sets a target Fed Funds Rate as a guide. The Fed can further influence the actual rate by buying and selling government securities in the financial market.

Published by the US Department of Labor, the Jobless Claims tallies weekly unemployment benefits claims. If there is an increase in claims, this typically indicates a weakening labor market. If there is a decrease in claims, this usually indicates there is a strengthening in the labor market.

In the US and abroad, one of the most anticipated items on the trading calendar is the Nonfarm Payrolls. Published by the US Bureau of Labor Statistics, this report tells of the monthly change in the total number of paid US employees, excluding the following categories:

  • Farm employees
  • General government employees
  • Private household employees
  • Employees of NPOs assisting individuals

It’s estimated that workers on the Nonfarm Payrolls account for roughly 80 percent of the GDP in the US.

Generally, a strong labor market has a positive impact on the overall economy. Household spending power is increased when there is an increase in the number of jobs. An increase in the number of jobs also implies an increase of consumption and economic growth.

Two popular strategies to use with binary options when trading economic events are the Iron Butterfly and the Strangle. An Iron Butterfly is a good strategy if the economic event is not expected to cause much movement in the market, as it is a neutral strategy. It is ideal for flat markets. The Strangle is just the opposite, and is used when movement is expected but the direction is unknown. It has low risk since two out of the money (OTM) contracts are traded, one being bought and one being sold.

Binary Options News trading

Most binary options traders swear by technical analysis when it comes to securing a long-term edge in their “trade”, more or less ignoring market fundamentals. The bias is indeed obvious: most binary option traders only incorporate fundamentals into their trading to the extent of simply staying away from the action when economic news are due to be released. While in itself this approach is indeed a healthy one considering a trader who is overly reliant on the technical aspects of strategy, beyond that it results in a plethora of missed – and potentially good – trading/profit-reaping opportunities.

Those trading indices, Forex, commodities or stocks have long resorted to news trading to secure an edge and indeed, there are traders out there who have turned this approach into a sort of art-form. Binary option traders can adopt similar strategies too and they too can be successful at news trading.

The first step (although this isn’t an actual part of binary option news trading strategy), is to find a tool that will help one make heads and tails of the news-flow. There are indeed trading tools out there thatwill organize the data, creating a virtual economic news calendar, that will have the importance of various news-releases graphically illustrated, together with the actual, previous and forecast values of the variables involved. Such a tool is a must for everyone looking to trade the news, and that goes double for binary option traders.
As it’s usually the case in trading, there aren’t any rules etched in stone when it comes to trading the news with binary options. There are however a number of measures one can adopt to radically impact his/her chances of success. There’s nothing particularly deep or technical about these “strategies” either. They’re all quite straightforward and depending on the sort of news they’re aimed at exploiting, quite self-explanatory as well.
One of the simplest ways to trade the news is through the breakout strategy. This approach requires quite a bit of pre-planning, but its execution is simple and straightforward as are the signals that call for its application. This strategy should only be used with news which are likely to elicit a highly predictable movement in the price of an underlying asset. With currency pairs, announcements regarding the increasing or decreasing of the interest rate are potentially such news. Usually, when the interest rate is raised, the targeted currency gains. When it’s lowered, it drops. In addition to that, one can of course analyze the ever increasing highs and lows as well as the increasing moving averages associated with the asset price to confirm the general trend (which in this case would be an uptrend). The critical points of this strategy are the entry point (which is when the trader actually places the Put/Call trade) and of course the expiry. In a hypothetical scenario, the entry signal can be the actual announcement. The trader may also wait to see what sort of effect the announcement has, entering shortly afterward. The expiry time can be anything from 1 hour to a day. Two options can in fact be bought: one with a one hour and the other with a one day expiry. This strategy calls for simple, Put/Call contracts.

Most of the time though, the problem with news trading is that while one knows a certain announcement will indeed produce a massive swing in the price of an asset, it isn’t clear in which direction the swing will occur. An announcement on the part of the US Federal Open Market Committee (FOMC) is a good potential example in this respect. Such a situation obviously calls for a range trade, with an “Outside” option purchased. This way, regardless of whether the swing happens upward or downward, as long as the price ends up outside of the range, the trade is a winner. This method is called trading on volatility, because that is indeed exactly what it does.

In conclusion: 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.

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7 Binary Options

Trading big market events is one of the most productive and fastest strategies in the options market, even if they might seem complex and hard-to-understand at first. Market movements can be accurately calculated given that the market will react to the stimuli. When trading in big market events it is crucial to dive into market research with a particular focus on the supply and demand state of play. The strategies are still based on individual approach and how the trader perceives the algorithmic calculations and the market, which means that a lot of depends on your trading skills and market knowledge.

Appropriate Tools to Follow the Market

What resources traders use is of crucial importance in order to earn profits. The economic calendar is the first go-to place where you can find hints when to expect the event and other key information such as price movements. Bloomberg and Reuters are also recommended sources since they are reliable and accurate.

In order to predict which economic indicators are going to change, you have to develop a deep understanding of the market indicators themselves and what could influence the price values. The best way to develop this trading skill is to follow important economic news which reveals information about interest rates (whether they go up or down), inflation, the status of the labor market. also, do not miss out on reading reports on the largest companies and their profitability and unprofitability. Combine all the sources to get a full picture of the upcoming market events and what you can expect.

Filter Your Information

It is impossible to follow all news, so you need to make a distinction between useful news and useless news. Just stick to the news that actually has a major impact on the market, the ones mentioned above (inflation, interest rates, also GDP, PMI, etc.). As a trader, you should find time to peek in the economic calendar at least once a week to stay in the loop with the latest developments and events. Also, the biggest market changes are usually linked to news coming from the most powerful countries, like the USA, Eurozone country, and Japan. Make sure to follow the press releases from these major actors and you will notice with time how these news influence the binary options market.

Big events trading is strongly linked to a news release, so you should follow the currencies of the country which is about to reveal important economic data. For example, if news from USA is expected that day, you should focus on currency pairs which are paired with the USD. Expect the USD + other currency pairs to fluctuate up and down around the time of news release and afterward.

There is no rush to place trades before news have been released if they expire after the release, but it is even better to patiently wait in order not to be misled by the false price movements which tend to appear in the first seconds due to dense market traffic, but also stay alert since the real prices will be displayed immediately afterwards.

Currency Trading during Big Market Events

If you think you are ready to enter trades based on big news releases, then you should be prepared to read market changes accurately. False predictions are a part of trading of course, but try to minimize losing trades by accurate event reading.

Planned and expected news should not be a problem since they are scheduled and you know exactly when they will happen. On the other hand, there is also unexpected news which is not easy to predict.

As a trader, you have probably already noticed that bad news mean usually that the value of a currency will rise, and good news causes the opposite, i.e. the currency drops in value. Still, this does not guarantee anything, since you are trading pairs, which makes currencies of the same pair co-dependent on the market and you have to take into account the values and movements of both currencies.

Another important feature in trading on big events is the ability to assess how serious the news are. You have to be able to predict whether the news trigger short-term (minute and hour long) changes in the market or are they going to affect the market on a long-term basis.

Perception of News Release

As a binary options trader, you have to understand that the market is fast as a lightning. All events come with an expiry date and other events will happen that make the initial news secondary. An influential news is an occasional event which have a short shelf-life.

Imagine the following situation: Great Britain announces a drop in exports which immediately reflects on the GBP and it starts to decrease in value. After several hours, the government announces that it is going to address this problem which should be solved in the following three months, which results in GBP rise again, surpassing even its former value. This is how crazy the market can get and traders should be aware that the economy rests on numerous inter-linked factors which represent the risk the trader is willing to enter.

Binary options are great because they offer short expiry periods which can be used to secure profits when the market is behaving like in our British export example.

Trading on big events relies on many factors and traders should use a set of different skills and various news sources to be able to anticipate price movements. With the right broker on their side, they will be able to crack the code to trading big market events.

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