Binary Options News Strategy
Trading the news in binary options market can be very profitable if you can correctly guess which way price is going to move. Here, let us share with you some of the common and widely used binary options news strategies which you can use it as part of your binary options trading strategies/plan. There are six types of news events and associated trading strategies we suggest you to focus on. Trade forex binary options.
Binary options news strategy 1 – Interest rate decisions The first news event type is interest rate decisions. These are normally undertaken by major central banking organizations like the European Central Bank in Europe, the Federal Reserve in the United States or the Reserve banks of Australia and other major Asian countries. When interest rates are increased, the assumption is that the local economy is improving and cheap borrowing rates to attract businesses are no longer required to sustain hiring, production and consumption in the economy. Raising interest rates, therefore, generally reduces the availability of money and increases foreign demand for it, thereby putting upward pressure on the local currency. However, if an interest rate is already expected, then on the day interest rates are raised, it will do little to the underlying currency. The key here is to identify the surprise or the unexpected increase. For example, if the Federal Reserve bank is expected to raise rates from 0.25% to 0.50% at the next meeting, and interest rates are raise 50 basis points to 0.75%, this surprise will result in a sharp increase in the value of the U.S dollar vs.
A basket of other currencies. A rise from 0.25% to 0.5%, will likely not move the markets because it is already priced in.
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Binary Options News Strategy
Instead the market will then focus on the press conference which normally follows interest rate decisions. Any talk by opinion leaders and heads of central banks about future rate rises could trigger a pre-emptive rally in the underlying currency – this is known as hawkish optimism. Or vice versa, any bearish talk of rate staying stagnant or even dropping, could be interpreted as dovish, causing a pre-emptive drop in the underlying currency.
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Major interest rate decisions, depending on the country, take place between 4 and 7 weeks apart. Binary options news strategy 2 – Employment numbers The next significant news event to focus on is employment numbers. In general, markets tend to focus on the employment numbers of major continents like the Eurozone and specific large economies like the United States, Japan and China. More than initial claims data, which represents the number of unemployed people in the economy seeking jobless claims and support, the job creation number, also known as Non Farm Payrolls or NFP in the U.S, for example, is the key data-point to watch. The NFP number measures the amount of jobs created in the previous month, in the U.S economy, outside of the farming sector. It is an important gauge of whether local businesses are feeling optimistic about their products and services facing healthy levels of domestic and foreign demand. Only when they see demand growth, will they invest in hiring new employees, which in turn increases spending power of consumers.
If the NFP number comes out inline with expectations, you may see no impact on the U.S dollar. If it comes in just 5 to 10,000 jobs ahead or below expectations, again, expect a muted impact and we do not advise to trade the number. However, if the surprise is rather large, say 20,000 jobs higher than expected, then this is likely going to trigger a rally in the U.S dollar.
If the number is inline with expectations, the market may turn its eyes to the unemployment rate, which if it comes in below expectations, normally triggers a sell-off in the underlying currency or a rally if better than expected. Binary options news strategy 3 – Consumer price inflation The next major news item is Consumer Price Inflation or CPI data. The CPI data, typically measured in a percentage month over month or year on year, shows to what extent prices of goods and services are rising in an economy – a concept known as inflation.
The higher the amount of inflation, the more the central bank need to control money supply and therefore, higher CPI readings can imply a rise in future interest rates. If a CPI reading comes in above expectations, this normally causes the underlying currency to rise. The vice-versa holds true as well, if the CPI reading is below expectations. Binary options news strategy 4 – GDP Next, let’s take a look at GDP, or gross domestic product figures. The GDP figures, typically measured in a percentage month over month or year on year, show the growth in economic output in an economy.