Binary Options Trading with News

Binary options traders often rely on data that countries and companies publish regarding different aspects that greatly affect the market. News trading is a fundamental binary options analysis method that has found popularity among traditional and binary options traders because of the ease in obtaining the information. Some news releases may denote price rise or falls. And depending on the news, different assets can also be affected.

Trading the news has been used as a technique to trade equities, currencies and other financial instruments on the financial markets for the longest time. Trading news releases can be a significant tool for financial investors and traders because they hold information that is crucial to market movement. For example, news trading can be traced back to times when news of a certain merchant who is involved in a certain trade can greatly affect its patronage among its customers.

Economic news reports often result in strong short-term moves in the markets, which may create positive trading opportunities for traders, if they know how to decipher the news correctly. Press releases about corporate profits, management change, and rumors of a merger, are all events that can cause a company’s share price to move considerably. Interest rates, employment and export/export rates, and a central bank’s policy change, are also kinds of news that can cause a deep change of an exchange rate.

Basing market trends on world and current events can be helpful. A press release of a country’s employment or retail data can greatly sway certain markets. However, new binary options traders are generally advised not to trade around news. Data releases may be helpful if you are a professional trader. But inexperienced traders should try to avoid trading around news or data releases. At times, news trading can be very volatile, and needs the expertise of an long-time trader to do it successfully.

Types of News Trading

There are two types of news trading according to the method employed in obtaining the information. Any of these two are widely used by traders worldwide.

Manual News Trading

Binary options traders who trade in shares of a listed company know there are certain events that may cause the share price to rise or fall. These factors include sudden changes in energy prices, a labor strike at a supplier, a poor month for the sales, and thousands more of other factors. Manual News Trading is the method of making a profit by trading financial instruments just in time (JIT), and in accordance to the occurrence of those events.

Automatic News Trading

This method is also known as event-based algorithmic trading, or as programmed trading. Automatic news trading has been there since electronic trading and digital tools have come about. However, this trading technique has increased in popularity since the early 2000s. As of 2009, studies suggested HFT firms accounted for 60–73% of all US equity trading volume, with that number falling to approximately 50% in 2012. Algorithmic trading allows investors to fine-tune their computers to scan live news feeds and watch for items affecting any listed company.

When Not to Perform News Trading

New binary options traders should try to avoid trading before news releases because news speculators may be positioning themselves for the pending news. Sometimes, this causes unpredictable movements and spikes in the market, depending on the news release. Sometimes, if the news release is something really important, related markets may not even move at all. They just stay flat despite the impending change.

Novice binary options traders should also try to avoid trading after news releases because this is usually the situation where new traders get very excited about a sudden market shift and wipe their accounts when the market goes in the different direction. Since new binary options traders are not that experienced to truly understand the effect of the news, they usually just blindly trade, usually in large amounts because of their confidence levels, and lose.

Let’s say that a news release comes out at 10:30 in the morning. Now, we can classify traders as patient and impatient traders. Patient traders are those who wait at least 30 minutes before and after an impending news release before they make a move. Impatient traders are those who trade between 10:15 to 10:45, thinking that this is the time when market movement will react based on the impending news. Impatient traders should consider taking another 15 minutes to make sure that the news has stood ground. Patient traders could also consider taking a full hour with reference to the time of the release.

When Should You Look out for News

The following table shows the approximate times in Eastern Standard Time wherein the most pertinent economic releases for each of the following countries are published. These are also the times at which the binary options trader should be paying extra attention to the markets if he or she plans on trading with news releases.

COUNTRY CURRENCY RELEASE TIME (EST)
United States USD 8:30–10:00 AM
United Kingdom GBP 2:00–4:30 AM
Japan JPY 6:30–11:30 PM
Canada CAD 7:00–8:30 AM
Germany EUR 2:00–6:00 AM
Italy EUR 3:45–5:00 AM
France EUR 2:45–4:00 AM
Switzerland CHF 1:45–5:30 AM
Australia AUD 4:45–9:00 PM
New Zealand NZD 5:30–7:30 PM

What Should You Look out for?

When trading news, the trader first needs to know which releases are actually expected that week. Second, it is important for the trader to know which data is important. Depending on the current state of the economy, the relative importance of these releases may change. For example, unemployment may be more important this month than trade or interest rate decisions. Therefore, it is important to keep on top of what the market is focusing on at the moment.

Generally speaking, these are the most important economic releases for any country:

  • Inflation
  • Retail sales
  • Unemployment
  • Interest rate decisions
  • Industrial production
  • Business sentiment surveys
  • Consumer confidence surveys
  • Manufacturing sector surveys
  • Trade balance

We will always contain the latest news to help you with binary options trading, so just stay tuned. In the meantime, we have compile a list of top binary options brokers to help you get on your way to making profits from successful binary options trades.

Read more articles on Strategy.

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