Trading Binary Options on News – Not for Beginners
As said in the introduction, trading on news and events 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.
Very high price fluctuations
The biggest reason why total newcomers and beginners should perhaps not trade on news is because the value of an asset can fluctuate very strongly before and after a major event takes place. In these stations the movement of the asset is almost never predictable.
Most often even experts are not sure in these cases what the right choice is. However, trading on news and events becomes much easier after a certain time after the event. Below, you’ll find a few rules that will help you trade binary options on news and various types of events.
15 – 15 minutes rule
What we didn’t say above is that the value of an asset doesn’t only fluctuate massively after an event took place but also shortly before the event takes place as well (in case the event was planned and announced).
As such, if you are an experienced and perhaps impatient trader you should not trade 15 minutes immediately before an event and 15 minutes immediately after an event. During these times, the movement of the markets is not predictable due to the high number of trades performed by others (mostly newcomers who have no clue.)
During these times you will be able to see super massive price fluctuations during very short time frames that seemingly don’t make any sense at all. – So, definitely avoid trading 15 minutes immediately before a major event takes place and 15 minutes immediately after the event.
30 – 30 minutes rule
If you are a medium skilled trader and have a bit more patience then perhaps you should not trade 30 minutes immediately before an event involving an asset and 30 minutes after that event took placed.
This is because of the same considerations as mentioned above. Price fluctuations are less heavy before and after the 15-minute mark, however they are still significant. So, in case you aren’t an expert yet, then you should avoid trading during these time frames.
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.
Trading on news involving currencies
One of the most popular ways of trading binary options is trading on news involving currencies. One of the best ways of doing this is trading on the Non-farm Payroll report released by the US Department of Labor on every third Friday of the month.
This report is a statistic of the US non-farm labor force during the previous month. The report will reveal overall how much new jobs were created or how much were lost in the US during the previous month.
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
We already dealt with this situation in our examples above. As hinted, the most common news related to companies involves product launches. 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.
And this is how you trade binary options on news, product launches and other types of events. And as said in the intro, if you are a total newcomer then perhaps you should wait trading binary options on news in the very beginning. Gather some experience with other strategies first.
In case you want to learn about more binary options strategies then please read our additional guides and tutorials. Knowing and understanding how a lot of binary options strategies work will hugely increase your overall winning rate.