News Trading Strategies For Binary Options
Many Binary Options traders spend a large amount of their time focusing on the technical aspects of trading. As a result they often don’t pay too much attention to the market fundamentals and news flow. The possible exception here is perhaps simply avoiding trading when economic data is due for release.
However did you know that you can create a good binary options news trading strategy to actually profit from trading specifically at times when news and data is due for release?
Trading the news has long been a popular binary strategy of financial traders. Traders of Forex, Stocks and Indices have traditionally taken this approach when they have an expectation of how the market will move once data is released.
Binary Options traders can also make use of a similar approach and develop a profitable strategy around these releases.
While markets can be analysed by technical analysis, prices are ultimately driven by the underlying market fundamentals.
As a result the release of economic news and market data is an important determinant as to where the price of an asset will move.
When creating a news based strategy the ‘news’ that you trade will depend upon the asset that you are trading. Broad market moving news such as Gross Domestic Product (GDP), Consumer Confidence Index (CCI) and Trade Balance figures can have a significant impact on markets in general. These are key news items that can drive the price of Indices and currency pairs up or down within seconds of release.
You could of course choose to trade more granular news events such as company reports or results on Stock options. This is great way to play the resulting moves that can happen if results over or undershoot prior analyst expectations.
News Trading Strategies.Entry Signal
There are no real hard and fast rules in news trading strategies that can be applied to trading the news with binary options. However there are many steps that you can take to help you build a strategy that will maximize your chance of success.
Trading the news requires pre-planning. Binary Options make this approach easier as you don’t have to work out where to place your stops or price targets as you would when Spot trading the markets. However you still need to identify your entry trigger and the direction that you expect the price to move.
A common way in which to trade news flow in binary options is by using a breakout trading strategy. The news is viewed as a potential trigger for the break.
There is actually a lot of flexibility as to how you can play such an approach. One of the simplest is to back the break from a prior range in the direction of the break. Once the initial break has been made you can either wait for some consolidation or ride the early momentum until the next expiry.
News Trading Example
Here is an example of news trading in action. It is on the GBP/USD trading currency pairs eur usd.
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.
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