The whole essence of this strategy is to open a deal just before the announcement of interest rates by the central bank. Hence, this strategy may be applied sevenfold a month. But this is offset by the fact that the strategy is really profitable and works out its signals well.
Altogether monthly the interest rates of seven major central banks such as the Federal Reserve, the European Central Bank, Bank of England, Bank of Canada, Bank of Japan, the Reserve Bank of Australia, the Reserve Bank of New Zealand, as well as the National Bank of Switzerland are published.
What can be the result of the publication of interest rates? They can be raised, left unchanged, as well as be reduced. The decision of a central bank is published once a month at a certain time, which, thanks to the macroeconomic calendar, the trader knows in advance. That is the way this binary option strategy works.
As for the impact of this indicator on the foreign exchange market, everything here is also quite simple. If the interest rate rises or remains unchanged, the price of the currency is mostly often growing. If the interest rate falls, the currency depreciates. That’s all. As you can see, there is nothing complicated here.
What trading signals does this strategy give? All the trading signals do not appear on the chart. But in this case they are not needed, because all trader’s attention is focused on the issue of the examination banking solutions of a central bank. Of course, from a certain point of view, a trader several risks opening a transaction just before the announcement of the interest rate.
However, in most cases, the interest rate of the current month is known in advance. Therefore, the risk that a trader will take a wrong trading decision is greatly reduced. On the other hand, at the time of interest rates announcement there appears a strong enough impulse in the market and the trader can earn good money.
If interest rates by a decision of a central bank are reduced, it is the perfect time to buy a Put option. In this case, it is possible to earn on a downward motion.
Thus, the strategy for trading binary options on interest rates is a good opportunity to profit a few times a month. And the strategy is very simple and does not require any serious trader’s knowledge of any fundamental or technical analysis.
That’s all for now. Got any questions? Just ask the expert!