Trade on the news: the main advantages, disadvantages, characteristics
The strategy is called so because it is based on fundamental data. This simple strategy for binary options is not only profitable, but also popular for many reasons.
Moreover, this strategy requires a little time for analysis of the market, because there is not much significant news and the trader knows in advance when certain news come, so he can choose some in advance to trade on it.
Any trading strategy for binary options involves certain skills of dealing with the trading platform, as well as the assessment of the market situation on the price chart. That is why it is necessary to begin training and mastering in the financial markets with the basics – binary options trading on the news. Thus, you will get the necessary skills to trade binary options, and will start earning money trading this exchange product.
First of all, trade on the news is quite effective and profitable trade. Why? Because usually the release of certain macroeconomic indicators causes immediate reaction of the market and leads to impulsive quotations movement in one direction or another. If you manage to get on the “departing train”, you will probably make a profit. The deterioration or improvement in the economic indicators of the country’s economy leads to a significant change in prices. And if so, then the trade in such market terms is a real pleasure.
What is the main features of trade?
To trade profitably during the release of economic news you should:
- Mark the list of news, which release you will be tracking.
- Watch and analyze previous news on history.
- Examine the characteristics of currency pairs’ movements.
- Prepare the terminal with all the options mentioned above (classic, range and constructor).
What news fit for this kind of trading?
Usually, news suitable for trading refers to the news group “AA”. At the same time, a trader should not take all the news of this group as a coming “explosion” of currency quotations. Many of these updates, the more releases that come without deviations from the median of their forecasts, may not cause impulsive movement.
So, to trade binary options on the news it is best to choose the following updates:
|BoE meeting announcement|
|ILO Jobless rate|
|BoE meeting minutes|
|Trade in goods|
|BoE quarterly inflation report|
|IFO business climate index|
|ECB meeting announcement|
|ZEW economic expectations index|
|ECB press conference|
|BOC meeting announcement|
|New home sales|
|FOMC meeting announcement|
|Existing home sales|
|RBA meeting announcement|
Also, all of the news is equally applicable to the European Union, with the exception of the performance of central banks’ heads. In this case, pay attention to the performance of Mario Draghi as ECB President.
If you are afraid of such a variety and you are afraid to get confused, then I advise you to choose Nonfarm payrolls from the US and Employment of the countries listed above. Because, as a rule, the economic indicators of unemployment cause the special excitement in the foreign exchange markets the most.
For trading on the news you can use:
Classic options. It doesn’t matter how many points will take the price from the transaction entry point;
Range options. You can set an approximate channel for price breakdown of levels before direct release of important economic news;
Constructor options, which help to install additional (usually not used by brokerage firms) expiration dates.
To trade on the news the terms of expiration from 15 minutes to 7 hours are used.
To trade on the news we need 5% of the deposit as a lot size. Thus, for the lot of 100 USD you need a deposit at least 2000 USD.
- Requires little time for analysis
- Is one of the most reliable and profitable strategies
- On strong movements a trader can make good money
- All the information you need to trade is easily accessible. The main thing is the correct interpretation
- There are traders who only get confused analyzing the news
- The strategy is not very suitable for beginners
- Much depends on the newsmaker – news are always perceived depending on their presentation
- There is a superstition that the news is only the background that helps you to justify the market movement later
That’s all for now. Got any questions? Just ask the expert!