When Not to Trade Binary Options
One of the great things about binary options is that they give you a lot of flexibility in terms of when you can trade, especially being as you can trade numerous underlying financial instruments such as stocks, currencies, and commodities. Being able to participate in different markets means you can trade during more times and days than you could if you were only participating in a single market. There are times you don’t want to trade if you don’t want to lose money, however. Here is when not to trade binary options:
- During financial reports. You’re not going to want to hear that, since financial reports can product volatile swings which many traders hope to profit from, but generally speaking you probably want to avoid reports unless you specifically know how to trade them using fundamental analysis. Those volatile swings can mean increased slippage and price spikes which may cause you to lose money.
- Weekends. You can theoretically place an order which has an expiration time and date on a Sunday or Monday when the market you’re trading in opens after a weekend off, but this is a great way to lose money. When markets come back from the weekends there is usually higher volatility and wider spreads. Trading during the middle of the week is usually a better way to go since you avoid this level of unpredictability.
- During big news events. There are many factors that can influence the price of various financial instruments. Which news is going to have an impact on your binary trading depends on the instrument you’re trading, but you probably want to avoid placing a trade right around an election, an IPO, or a similar event unless again you’re an expert at trading with fundamental analysis and you know what you’re doing. Here’s a tip: most people don’t. You’re probably no exception, especially as a beginner.
- Avoid times when the market is choppy. If price is spiking a lot without any obvious trend, you probably want to keep out of the market until you see things settle down a bit. This isn’t to say you can’t profit during a consolidating market, especially with binary trading—but there is a difference between a market which is consolidating quietly and one which is choppy with a lot of fakeouts. If you don’t see a great opportunity with a great context, it’s best to wait for another opportunity.
You can use binary trading with many different financial instruments, which means that if one market is untradeable, you can always switch to something else while you wait for big news events and reports to pass or for the market to become more predictable and context to line up for a better trade. Just remember to test your trading on all the instruments you’re thinking of working with before you go live. The worst time to trade binary options is always when you’re unprepared. So do your homework and have consistent results in testing before you trade with real money.