Trading binary options on news: strategies and recommendations

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Trading on binary options news

Trading binary options based on news is a complex process from the point of view of analysis, which, if the forecast is successful, can bring more profit in a very short time, unlike standard binary options trading methods . But for this approach, it is recommended to use separate strategies , which, on the contrary, are not always effective in regular trading.

In addition, trading based on news requires certain experience and knowledge, which is why it is not suitable for beginners. In this article we will try to cover this topic and show how to correctly trade binary options based on news.

Content:

Economic calendar in binary options news trading

News trading on binary options is different in that in this situation traders have to abandon most of the technical analysis and switch to fundamental analysis . In this case, you must use the economic calendar . This tool shows a schedule for the release of important news that affects quotes:

economic indicators

The reasons why technical analysis loses its effectiveness is that in the current conditions prices change under the influence of many traders (the crowd). Because of this, volatility increases sharply, and the price changes in an unpredictable way. Therefore, signals from indicators for binary options lose their power. Despite this, you can still make money from news. With the right approach in the current conditions, it is possible to make a profit in a relatively short period of time. But it must be taken into account that transactions after the occurrence of such events become highly risky.

Due to the high risk, some traders refuse to trade binary options based on news, trying to carry out trading operations in comfortable conditions at predicted prices and with a stable, pronounced trend .

Returning to the economic calendar, it is an indispensable tool in news trading, as it provides a lot of useful information, which is precisely used to make a profit. The calendar shows:

news release time;
the country to which the published indicators belong;
importance of news;
news title;
fundamental indicators (past, present, future).

Thanks to this list, you can select a news release that is highly likely to generate income.

Preparing to trade binary options news

This type of analysis begins with studying the history of a specific news story. You can get similar information by clicking on the indicator. For example, let's take the "Employment Change" in Canada for February:

employment change in canada

Note: In this article we used the economic calendar from Investing .

Clicking on this news will open a new page with a description of the news, where you can find out what it means, as well as other important information about it:

information about changes in employment in Canada

Below the chart you can find historical data for the news. When studying this data, you should pay attention to the actual value, forecast and previous value. When analyzing the table above, it is necessary to compare the forecast with the value that was ultimately achieved. In particular, the top line indicates that the previous figure was 200.1K, the actual figure is 336.6K. But, according to the forecast, this parameter was supposed to reach 160K:

historical news data

According to the predicted result, this figure should have decreased from 200.1K to 160K. As a result, the number of employed people, on the contrary, increased significantly. That is, both the expected and actual values had a positive impact on the Canadian dollar and vice versa for the US dollar. And since in the USD/CAD currency pair the base currency is the US dollar, the chart of the pair showed a fall:

moment of news release

For ease of perception, these parameters are colored green, red and blue. A rise in the indicator is colored green, a fall in red, and the forecast always remains gray.

As an example of what situations can happen, consider news such as the number of US non-farm payrolls. In November 2017, this value was 18K. Experts expected growth to 310K, but the actual value was 261K:

non-farm news story

That is, the actual figure turned out to be lower than predicted. But in reality, the number of employees increased from 18K to 261K. That is, the dollar exchange rate should have strengthened. The price in the EUR/USD pair first went up. Traders reacted differently to the published event, since the actual value turned out to be lower than predicted. But later there was a rapid correction, and the quotes went in a different direction:

moment of news release on the chart

This suggests that novices may be blind to how metrics should be interpreted and will only look at the colors when they should be looking at the metrics themselves.

It is important to understand that when trading binary options based on news, future releases are not always published correctly. This is evidenced by the indicators for June 2, 2017 and October 7, 2016. In both cases, an increase in indicators was predicted, while, on the contrary, it decreased. These events led to a decrease in quotes:

historical data in the calendar

Based on this information, it is also recommended to compare previous and actual values during analysis. Thanks to this information, it is periodically possible to understand the current direction of the trend in relation to a specific asset. But you should do this with caution and collect complete statistics of news indicators before use.

How to choose currency pairs for binary options news trading

To successfully trade binary options based on news, you should pay attention to the following currencies:

USD;
EUR;
CAD;
CHF;
AUD;
GBP;
JPY;
NZD

You need to trade pairs that include one of the given currencies. All of these currencies are leading in the world economy. When choosing currencies, it should be taken into account that currencies (some strongly, others weakly) depend on the state of the US dollar. Therefore, when opening transactions, you need to pay attention to news releases regarding this asset, since such events can affect the market as a whole.

Success in binary options news trading directly depends on the trader's ability to analyze several factors. In particular, when forecasting prices, it is useful to take into account technical analysis factors:

supply and demand;
trend;
graphical analysis ;
candlestick analysis .

When publishing several events, it is important to “cut off” the less important ones and take into account the more significant ones in the analysis.

The most important types of news in binary options trading

If you decide to trade binary options news, then you should know what news you should pay special attention to. Here is a list of news that could most affect prices:

Change in the number of people employed in the non-farm sector . The higher the number of people employed, the more a country can produce in exports and other goods, which directly affects GDP.
Changes in the interest rate of the Central Bank (US Federal Reserve and other regulators) . This mechanism affects the entire economy of the country. Raising rates reduces inflation. But it also slows down financial activity. Reducing the rate contributes to the growth of lending, which has a positive effect on business activity.
Retail sales . The indicator determines the total volume of household expenditures in a particular country.
Inflation . This indicator determines the nature of changes in the country's economy. When inflation rises, consumption decreases, which negatively affects the flow of money and reduces budget revenues. Because of this, quotes are falling. The opposite situation leads to an increase in the exchange rate.
Unemployment Claims Data . With low employment of the population, the state does not realize its full economic potential.
Business Sentiment Index . The indicator reflects current business activity and the expectations of top management of enterprises in the projected future. An increase in the index contributes to the growth of the national currency.

The importance of these indicators varies depending on the state of the state economy. In particular, if analysts expect an increase in the number of unemployed people, then a news release telling about this is more important than data on changes in the interest rate.

Trading news on binary options: strategies

Traders use different strategies to trade binary options based on news. But the simplest and most popular, which many traders use most often, is volatility trading.

Despite the complexity and the need for preparation, this approach can be the fastest and most profitable. With a properly structured strategy, there is little room for making mistakes. For successful trading, you should choose news indicators that maximize volatility and “push” prices in any direction. Examples of such news:

number of people employed in the non-agricultural sector;
interest rate change;
unemployment rate.

But you cannot open trades if you expect the simultaneous release of two or more news events (which is rare) that contradict each other. In such conditions, the price will most likely rise and fall, leaving long shadows on the candles and preventing the asset from moving in one direction.

The option type within this approach is selected taking into account the direction of movement: up – Call, down – Put. You can also use non-standard types of binary options, such as “Range” and the like. It is recommended to open trades either immediately after the news is released, or after some time, when the market reacts to the indicators. The expiration period should not exceed 30 minutes. If you use average news, then expiration should not be more than 15 minutes.

Examples of trading using a breakout strategy

For an example of volatility trading, consider the release of data on changes in employment in the US non-farm payroll sector. In the calendar you can see that at this time, along with this news, other news in the United States is being released, but you should not pay attention to them, since they are all quite weak compared to the news we need. The forecast for the number of employees was 150K. The previous figure was 510K. Expectations turned out to be much higher than reality, but at the same time lower than previous ones and amounted to 467K. This means that there will potentially be less gross output produced, which will negatively affect the dollar. So we should expect the currency to fall:

strong news

Acting within the framework of the strategy under consideration, you need to choose a pair with the dollar. It can be any pair, such as USD/JPY, but it is best to choose EUR/USD as it is more volatile. Since the dollar is not the base currency in this pair, we will need to use the CALL (“Higher”) option. Why? It’s simple - since we predicted a fall in the price of the dollar, and when paired with the euro it comes in second place, then in this case, when the dollar falls, the euro rises. If the dollar was in first place (USD/EUR), then we would see a fall on the chart. The expiration period in this case, as mentioned earlier, should be equal to 30 minutes. The chart below shows the reaction to the news and our potential trade:

reaction to the news on the chart

As a result, this news gave a strong impetus to the price and the growth was more than 100 points, and even after 30 minutes the price continued to rise.

Other news is traded according to exactly the same principle, but it is important to choose strong news.

Which broker to choose for binary options news trading

Almost all brokers that provide the opportunity to trade binary options are suitable for working within the framework of the described approach. But it is best to work with brokers that allow you to instantly open transactions.

These companies include Quotex and Pocket Option . Transactions with these brokers do not require confirmation, which reduces the time required to open a position. Also, the listed companies allow you to trade options in conditions of high volatility.

Another plus is the ability to add trading assets to the panel, allowing you to switch between them if you decide to use different currency pairs for trading. Also, the Quotex broker for EUR/USD and GBP/USD has times when the odds are fixed and do not change:

fixed currency pairs quotex

Conclusion

Trading news on binary options is a way to quickly make money on changes in currency rates. But this approach is high risk. Therefore, you can start this type of trading with knowledge of fundamental analysis. It should also be taken into account that a number of publications can have an impact on several financial assets at the same time. To avoid mistakes, it is recommended to open positions during the release of one important message.