Trading Binary Options to News Releases and Events

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Trading Binary Options to News Releases and Events

News events are a major factor in determining market direction in any financial market, and binary options trading is no exception.

To be able to trade the news effectively in binary options, you need to know how to trade and what to trade. You also need to identify which platform you will be using to trade, as trading the news on American-style binary options brokers is very different from doing same on European-style binary options brokers.

Trading the News on American-style Binary Options

If you are going to be trading the news on NADEX or Cantor Exchange, then you need to understand what trading the news is on these platforms. You can trade certain news items directly on these exchanges. The US Jobless Claims data and the Non-Farm Payroll report are the two major news events you can trade on NADEX or Cantor Exchange directly. Unlike most binary options assets, the news releases do not track any underlying markets. You just need to understand what the news is all about, what it traded and how to set the trades accordingly.

About the News Events

There are many events and releases that impact the price of certain related assets. Fortunately the biggest economic news and releases are published in an open forum and it is known in advance when and what will be published. Please visit the economic calendar for binary options to see upcoming news and economic releases.

The Jobless Claims measures the change in the number of people in the U.S. who are applying for unemployment insurance (jobless benefits) for the first time. The data is published every week at. You will be presented with a consensus number, a previous number and when the data is released, an actual number. You need to know the following:

  • The difference between the actual number and consensus number. Is the present figure worse or better than the previous week’s numbers?
  • Is the difference between the actual and consensus numbers greater or less than the difference between the consensus and previous numbers? This is known as the deviation and it will determine the extent to which the USD will react to this news release.
  • Keep in mind the present employment situation in the country as well, as it will determine how the markets react to the figures.

The NFP measures the change in the number of new jobs created in various sectors of the US economy except the agricultural sector. You will also be presented with a consensus number, previous number and when the news is released, the actual number. This news release creates volatility on the USD/JPY. The same questions you must answer as written above for the Jobless Claims report, must be answered by the trader before trading the NFP. It is released on the 1 st Friday of the new month by 8.30am EST.

The following resources can be used to predict what the news release numbers will look like:

Trade Strategy for News Releases

Certain trade strategies must be used when trading the news on American-style binary options. These are as follows:

  • The Out of the Money (OTM) strategy is used to trade situations of surprise. So if the recent releases for the Jobless Claims and NFP show the actual numbers beating consensus estimates, an OTM strategy should be set on the Monday before news release, using the consensus number as strike price.
  • If the trend shows that actual numbers are recently falling below consensus, an in-the-money (ITM) strategy is used, and this trade is setup on the day of the news release.

You may also trade the currency pairs associated with these news items. The USD/JPY is the preferred currency pair to trade the NFP, while the EUR/USD and USD/JPY are used to trade the Jobless Claims report. You can trade these currencies on the basis of BUY if the news releases beat estimates (better than expected), or SELL if the news releases disappoint.

Trading the News on European-style Binary Options

If you are trading the news on European-style options, used by platforms such as 24option, you have to be extremely careful. This is because if the number of orders on one side of the trade far outweighs those on the other side of the trade equation, there is every likelihood that trade on that asset will be frozen and it will be impossible to trade the news.

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Therefore, the focus should be two-fold:

  • Avoid trading on an asset directly and rather trade correlated assets
  • Trade after the news has been released to profit from the longer term effect.

Here is how to deploy these trade strategies:

Correlated Asset Trading in Response to News

To illustrate this, we will cite the example of the Australian Dollar and Copper. Australia is the home of raw materials production and most of this goes to China where 40% of the world’s manufacturing takes place. So there is an integral link between Chinese manufacturing data (such as the PMI), Chinese GDP figures, the value of the Aussie Dollar, and Copper prices. A boost in Chinese manufacturing or Chinese growth will trigger a demand for commodities such as copper which are mined in large quantities in Australia, and will also boost the value of the Aussie Dollar.

So one news item I would follow would be the Chinese manufacturing data, or the Chinese GDP data. But rather than try to trade the pairing of the USD and the Chinese Yuan (wherever it may be found), it would be better to trade copper. Copper and the AUD/USD have a direct relationship to the Chinese data on manufacturing or growth, so they track it wherever it goes. By trading correlated assets, you avoid a scenario where every trader can almost guess the direction of an asset, push the order flows out of balance and force the brokers to freeze trades in that asset.

There are other correlated assets that could be traded. Try to look for the connections. For instance, what is the relationship between the Japanese Yen, the Nikkei 225 average and the Dow?

The snapshot above can give you a clue as to what the relationship is. You only need to read news about the recent surge of the USD against the Yen, and the gains made by the Nikkei 225 in that time frame to understand the relationship.

If you would like to know more about trading the Forex to news releases as fundamental analysis please visit the Economic Calendar for binary options.

Binary Options Trading with News

Binary options traders often rely on data that countries and companies publish regarding different aspects that greatly affect the market. News trading is a fundamental binary options analysis method that has found popularity among traditional and binary options traders because of the ease in obtaining the information. Some news releases may denote price rise or falls. And depending on the news, different assets can also be affected.

Trading the news has been used as a technique to trade equities, currencies and other financial instruments on the financial markets for the longest time. Trading news releases can be a significant tool for financial investors and traders because they hold information that is crucial to market movement. For example, news trading can be traced back to times when news of a certain merchant who is involved in a certain trade can greatly affect its patronage among its customers.

Economic news reports often result in strong moves in the markets, which may create positive trading opportunities for traders, if they know how to decipher the news correctly. Press releases about corporate profits, management change, and rumors of a merger, are all events that can cause a company’s share price to move considerably. Interest rates, employment and export/export rates, and a central bank’s policy change, are also kinds of news that can cause a deep change of an exchange rate.

Basing market trends on world and current events can be helpful. A press release of a country’s employment or retail data can greatly sway certain markets. However, new binary options traders are generally advised not to trade around news. Data releases may be helpful if you are a professional trader. But inexperienced traders should try to avoid trading around news or data releases. At times, news trading can be very volatile, and needs the expertise of an trader to do it successfully.

Types of News Trading

There are two types of news trading according to the method employed in obtaining the information. Any of these two are widely used by traders worldwide.

Manual News Trading

Binary options traders who trade in shares of a listed company know there are certain events that may cause the share price to rise or fall. These factors include sudden changes in energy prices, a labor strike at a supplier, a poor month for the sales, and thousands more of other factors. Manual News Trading is the method of making a profit by trading financial instruments just in time (JIT), and in accordance to the occurrence of those events.

Automatic News Trading

This method is also known as algorithmic trading, or as programmed trading. Automatic news trading has been there since electronic trading and digital tools have come about. However, this trading technique has increased in popularity since the early 2000s. As of 2009, studies suggested HFT firms accounted for 60–73% of all US equity trading volume, with that number falling to approximately 50% in 2020. Algorithmic trading allows investors to their computers to scan live news feeds and watch for items affecting any listed company.

When Not to Perform News Trading

New binary options traders should try to avoid trading before news releases because news speculators may be positioning themselves for the pending news. Sometimes, this causes unpredictable movements and spikes in the market, depending on the news release. Sometimes, if the news release is something really important, related markets may not even move at all. They just stay flat despite the impending change.

Novice binary options traders should also try to avoid trading after news releases because this is usually the situation where new traders get very excited about a sudden market shift and wipe their accounts when the market goes in the different direction. Since new binary options traders are not that experienced to truly understand the effect of the news, they usually just blindly trade, usually in large amounts because of their confidence levels, and lose.

Let’s say that a news release comes out at 10:30 in the morning. Now, we can classify traders as patient and impatient traders. Patient traders are those who wait at least 30 minutes before and after an impending news release before they make a move. Impatient traders are those who trade between 10:15 to 10:45, thinking that this is the time when market movement will react based on the impending news. Impatient traders should consider taking another 15 minutes to make sure that the news has stood ground. Patient traders could also consider taking a full hour with reference to the time of the release.

When Should You Look out for News

The following table shows the approximate times in Eastern Standard Time wherein the most pertinent economic releases for each of the following countries are published. These are also the times at which the binary options trader should be paying extra attention to the markets if he or she plans on trading with news releases.

COUNTRY CURRENCY RELEASE TIME (EST)
United States USD 8:30–10:00 AM
United Kingdom GBP 2:00–4:30 AM
Japan JPY 6:30–11:30 PM
Canada CAD 7:00–8:30 AM
Germany EUR 2:00–6:00 AM
Italy EUR 3:45–5:00 AM
France EUR 2:45–4:00 AM
Switzerland CHF 1:45–5:30 AM
Australia AUD 4:45–9:00 PM
New Zealand NZD 5:30–7:30 PM

What Should You Look out for?

When trading news, the trader first needs to know which releases are actually expected that week. Second, it is important for the trader to know which data is important. Depending on the current state of the economy, the relative importance of these releases may change. For example, unemployment may be more important this month than trade or interest rate decisions. Therefore, it is important to keep on top of what the market is focusing on at the moment.

Generally speaking, these are the most important economic releases for any country:

  • Inflation
  • Retail sales
  • Unemployment
  • Interest rate decisions
  • Industrial production
  • Business sentiment surveys
  • Consumer confidence surveys
  • Manufacturing sector surveys
  • Trade balance

We will always contain the latest news to help you with binary options trading, so just stay tuned. In the meantime, we have compile a list of top binary options brokers to help you get on your way to making profits from successful binary options trades.

Binary Options Trading On The News

Perhaps one of the most popular ways to trade in binary options is to trade on the news and the latest events. It is believed that this is the easiest available form of binary options trading.

The so-called trading on the news is only recommended for traders of medium and high level experience. This is because the asset price is usually the most changeable during related news. Newbies will definitely face problems in predicting the movement of the asset during special events.

Nevertheless, trading on the news in binary options remains one of the best ways to make money online, but only if you follow a few well-established principles. Read this article to learn how to trade binary options on the news and events.

Binary option trading on the news is not for beginners

As mentioned in the introduction, trading on the news and events is not recommended for beginners. If you are already engaged in binary options and want to make this your main income, you may need to try some other strategies found in the Internet.

Predicting market moves is almost impossible immediately before and right after the release of important news or events related to the main asset. Only a small number of experienced traders are confident enough to say what will happen next, using their experience, analysis, and the details of specific news events.

Very high price fluctuations

The biggest reason why beginners should not trade on the news is that the cost of the asset can fluctuate greatly before and after the main event takes place. During these periods, the asset movement is almost always unpredictable.

Often, even the experts are not sure how to make the right choice. However, trading on the news gets much easier a bit later on, after the release of information about the event. Here are some rules that will help you to trade binary options on the news and various related events.

Rule of 15 minutes

As we have said above and will repeat again – the price moves of the asset may vary after the event has already happened, shortly before its announcement, and during the event itself, as well as if the event had been planned and announced in advance.

Therefore, if you are an experienced and perhaps still impatient trader, you should not trade during the 15 minutes immediately before the event and 15 minutes immediately after the event’s announcement. At this time, the movement of the markets is not predictable because of the large number of transactions performed by others (mostly beginners who have no experience and no idea of what is going on).

At this time, you can see quite sharp fluctuations in prices for a very short period of time, which would seem to make no sense at all. So avoid trading in the first 15 minutes immediately before and 15 minutes after the news; this will dramatically help you avoid the stress of potential losses.

Rule of 30 minutes

If you are a trader of intermediate experience, and you have a little more patience, then perhaps you should not trade for 30 minutes prior to the asset’s related event and for 30 minutes after the event occurred.

This rule is based on same considerations as mentioned above. The fluctuations are less severe than before, but even after 15 more minutes, they are still significant. Thus, if you are not yet an expert, you should avoid trading during this time.

How to effectively trade on the news and events

So, now you know exactly in which periods of time you should avoid trading. However, you still do not know when you’ll have the best chance to boost your capital in cash when trading on the news.

You will have the best possible chances to win with binary options if you start trading right before the expiration of 30 minutes before the event takes place or 30 minutes after the event has taken place. Let us explain why this is so:

30 minutes before the start of the event:

Before an event occurs, there is usually a general consensus about the nature of the event. Here is a great example – if Apple is planning to launch its new product in a few hours, most people will assume that the product is of good quality and it will have a positive impact on the company’s shares.

In this case, it is very likely that the price of Apple shares will increase during this time. You can purchase the appropriate option contracts in this situation. However, approximately 30 minutes prior to the product’s launch, everything will just go crazy. Millions of people will begin to react, buy or sell shares, and the price of shares will start jumping up and down.

30 minutes after the event:

During the first 30 minutes (while the event itself is likely to continue or still is going on), a lot of speculators are still actively trading, causing the price to jump without, it would seem, any logic.

However, after the first 30 minutes, the asset stabilizes and its price either continuously increases or decreases. This happens because after 30 minutes (in the case of a product launch, for example), people are no longer able to evaluate the nature of the event. As in the example of Apple, at the 30th minute since the launch of the product, you’ll be able to define the importance of the released product. If you see that the company has released something significant, you can be sure that the cost of Apple’s stock will increase accordingly.

However, if the product is not of particular interest, or it is just a minor upgrade of the previous one, you should know that the company’s share price will decrease. You can make correct predictions and also earn a lot of money.

Trading on the news involving currencies

One of the most popular ways to trade in binary options is trading on the news that is related to currencies. One of the best ways to do this is to trade on a wage non-farm report, which is published by the US Department of Labor every third Friday of the month. This report is the US workforce statistics for the last month. The report reflects the total number of new jobs that have been created or lost in the United States during the previous month.

This report always affects the rate of conversion of the US dollar to other currencies. There are two main scenarios that need to be taken into account:

– Over the last month, new jobs have been created:

The dollar will increase in value. In this case, you forecast that the exchange rate of USD/XXX (XXX = other currency) will decline, as the dollar has become stronger due to the fact that more and more investors have invested in the USD, knowing that the volume of the US economy has grown in the last month due to the creation of new jobs.

– Over the last month, the unemployment rate has increased:

In this case, the value of the dollar will fall, due to the fact that the loss of jobs indicates stagnation and decline in economic production. In this case, you should buy a binary option contract that predicts an increase in the exchange rate of USD/XXX (i.e., the USD will depreciate).

Trading on stock news

We have already dealt with this situation in our examples above. As has become clear, the most important news related to a particular company includes product launches. If the general opinion is formed that the next product release will be successful for the company, the shares of the company are expected to increase.

If, within about 30 minutes after the product launch, it is evident that the new product is really high quality, then the value of the company’s shares will naturally increase. It will be easy enough to make good predictions in these cases.

But, again – try to avoid trading for 30 or 15 minutes before the product launch, and 15 or 30 minutes after the official release of the product. This advice is extremely important.

Final words

As stated in the preface, if you are, in general, still a novice in binary options, perhaps before trading binary options on the news it is more reasonable to acquire your first trading experience working with other strategies first. For experienced traders, this article does not say anything surprising , but it should convince you once more of the accuracy and consistency of these recommendations.

Best Binary Options Brokers 2020:
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