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.
Imagine the situation: today a certain company releases a new product – you would think that the price of shares of this company wouls go up, wouldn’t you? Well, it is not that easy. In fact, this situation is more complicated than it seems. Trading on the news is not recommended for beginners and we will now explain why.
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.
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.