Binary Options News Trading

The decision to trade a financial product is based on technical analysis or fundamental analysis – or both.

While technical analysis deals with the interpretation of chart patterns or technical indicators, the fundamental analysis consists of making decisions based on the interpretation of economic news.

The Economic Calendar is an important tool for this. Checking the economic calendar should be part of every trader’s daily ritual. We recommend investing.com. This economic calendar is in English but offers some additional features that are very helpful. See the economic calendar here.

Newstrading with the economic calendar – how it is interpreted

A trader of Binary Options uses the same information when buying a call or put option as any other trader. Whether stocks, gold, oil, or indices, all these markets are sensitive to important economic news.

Traders, therefore, need to know what to look for in the economic calendar and how to interpret it. You have to look at which event is the most important because there are big market moves. Often small news do not influence the market

Find the meetings of central banks

The economic calendar usually has a code. This code divides the messages/events into three categories:
3 stars stand for very important, market-moving news, 2 stars for second and 3 stars for third. The 1-star news can be ignored from the beginning. You concentrate exclusively on the 3-star ones. These are the ones that move prices.

Importance of news

Trading is all about the interest rate. In other words, how will the central bank decide next time to regulate or influence monetary policy? So first of all, you mark the meetings of the central banks.

These meetings have different names in different countries. In Australia, the RBA (Reserve Bank of Australia) interest rate decision is called the “cash rate”, in the eurozone it is the minimum bid rate, in the United States it is the FOMC (Federal Open Market Committee) meeting, and so on.

The central banks meet regularly to set monetary policy for the coming period. The major central banks meet monthly (RBA, Bank of England), others meet every six weeks (ECB – European Central Bank, Federal Reserve in the US) or even quarterly (SNB – Swiss National Bank).

NZD central bank news

From a trader’s point of view, these data are crucial. Any economic news or part of economic news between these dates allows the trader to make a guess as to what the central bank will do next.

The importance of a good broker when you do News Trading

When you do news trading the market will do big moves. The volatility is very high and the price is changing immediately. So it is very important to use a reliable broker. There are platforms that are not good and shut down when it comes to news trading. Another problem is that you might come too late into your trade. There can be a delay between you opened the trade and you get your execution.

From my experience, it is very important to use a good reliable broker. I tested more than 20 different Binary Options platforms and in the list below you will find the 3 best. They will give you a good experience when you are trading the news. Test a free demo account:

Broker:

Rating:

Advantages: 

Start trading: 

IQ Option logo
5/5

+ Yield up to 100%
+ Best platform
+ 24/7 support

Deriv logo
4.5/5

+ Yield up to 95%
+ Auto trading (bot)
+ MetaTrader 5

Pocket Option logo
4/5

+ Yield up to 92%
+ Bonus program
+ Accept any clients

Focus on the 3-Star events

Once you find out the meetings of the central banks, the traders focus on the 3-star events. This economic news shows how the economy changed between two central bank meetings.

Based on this news, the traders get an idea of the next step of an interest rate decision by the central bank.

The economic calendar indicates the time when exactly the news will be released (this is very important because trading algorithms are responsible for the huge spikes (candle wicks) right at the beginning or end of the hour), the currency they refer to, and the interpretation of them – why they are important, what traders are particularly concerned about, and so on.

In addition, the previous data is also given. And find an estimate or predicted value for the upcoming data. This is used to interpret how the actual data differs from the forecast.

Find out what really counts

For all traders, no matter which financial product they trade, the interpretation of the news is always the same. For each economy, simply look for the red events that show the changes in inflation (CPI), labor data (actual numbers and unemployment rate), GDP (gross domestic product – the total value of goods and services produced by an economy), retail sales and the PMI (Purchasing Managers Index).

Next, they look at their development compared to the previous central bank meeting. If the general trend is “bullish”, the chances that the central bank will have a “hawkish” (interest-driving) trend at the next meeting are increased. This also has a bullish effect on the currency, economy, and so on.

If not, look for the opposite.

Newstrading Video Tutorial

On our YouTube channel, we have published a video that explains very clearly in detail how news trading works in the Binary Options market.

Conclusion

There is much information that can be obtained from the economic calendar. Binary options traders must understand that the market, in general, is very dependent on this news.

We live in an age where people are, so to speak, lagging behind trading robots, as algorithmic trading dictates the price change. As such, we have to consider the same things as robots and interpret them on our own.

It is the only way to determine the correct expiration time for your Binary Options.


See my other articles about Binary Options:

Leave a Reply

Your email address will not be published. Required fields are marked *