Binary Options News Trading Strategy
If you’re looking to make a profit in the trading market by following what’s happening in the news, then a news trading strategy may be for you.
A news trading strategy for binary options is another method to enjoy the market. The wind of the economic market can change anytime. So, the strategy will help you make decisions based on breaking events and announcements.
You may have heard of the economic calendar. And it is one of the premier resources for traders to find current news and events.
The writer of this article will walk you through the strategy and show you how to maximize its benefits.
Let’s hunt it down!
What Is News Trading Strategy
There are several strategies when it comes to making money in the trading market. News trading is one of them.
You can’t trade the financial markets blindly without doing any research. And the news is one of the key elements of the investment market. Generally, news trading is a technique or strategy that traders build based on current news. Note that economic data determine the market’s colour.
On the other hand, about risk, yes, this trading method carries the highest risk. But it is an effective way to make money. Both technical and fundamental analysis are essential to determine the underlying asset value.
While the market will get a lot of buzzes, it won’t necessarily be profitable for every trader. So don’t jump just because you think you’ll make money. Make yourself capable enough of controlling the volatile market.
At the same time, consider yourself a day trader if you are a news trader. As a rule, day traders always close their trading positions before the market closes.
Example of News Trading Strategy
Cryptocurrency is a good example of the most volatile market. Let’s say Elon Musk tweeted that Bitcoin is a scam. After a few hours, the price of this hyped crypto coin will drastically fall. Traders who know market manipulation rules will buy the coin and wait for the right time.
And this happened to many traders. In just six hours, the price of Bitcoin jumped over $6,300 after Elon Musk added “#Bitcoin” to his Twitter bio.
To avoid becoming a frustrated trader, you must understand news categories and their importance. Every time good news breaks, the price rises unexpectedly. Similarly, devastation occurs when the news is bad.
So, take time, digest the news, and then trade.
Technical Analysis Vs News Trading Strategies
Technical analysis is a trading discipline that helps traders to make decisions by evaluating price action. According to the believer, by analyzing the past price movement of an asset, you can predict future price movements.
Traders also use price action strategies on trading charts using various tools and indicators. Basically, price action will give you all the market data with a clear picture of what is happening in the market. Depending on trends and mathematical data, traders open or close the position.
However, news traders heavily depend on the signals generated in the market when any event occurs.
Relation Between Fundamental Analysis And News Trading Strategy
Fundamental analysis works based on market sentiment. However, it is quite different from fundamental analysis. On the other hand, fundamental analysis involves economic, social, and political factors.
And news-based trading is more likely to be a fundamental analysis. Let’s say Covid is the greatest example of a fundamental outbreak.
Investors, however, choose it as a long-term investment. Alternatively, the news trading strategy is suitable for short-term traders because it focuses on account-specific events. So, it is the primary choice for news traders.
Types Of News Trading Strategy For Binary Options
Not all trading news is scheduled. Some unpredictable news occurs and impacts the normal trading environment. Let’s see the two types of news that positively or negatively influence traders.
- Scheduled news:
This type of news comes later, but traders and investors have a shady idea about that. Traders already know why this event will happen except for the details of the announcement, such as interest rates, retail sales, inflation and employment reports.
- Unexpected news:
It is just the opposite of scheduled news. This type of event and announcement happens unexpectedly without any prior notice. Additionally, black swan events are also a part of unexpected news breaks, such as terror attacks, natural disasters, etc.
Note that the 9/11 terror attacks greatly impacted the financial market.
On the flip side, short-term changes can also affect the market significantly.
How To Trade News Using Binary Options
There is a common misconception that trading binary options is something that only professionals can do. But the real scenario is completely different from this myth. Anyone can trade options with a small or professional head.
When it comes to trading news using binary options, there are a few things you need to keep in mind.
- Do research before investing any money
- Be aware of the risk
- Consult a financial advisor if you are unfamiliar with binary options trading news.
Also, you need to use reputable sources for up-to-the-minute information on market trends, asset prices, and volatility levels, all of which can help you make informed trading decisions.
Apart from these, finding a regulated broker is the primary step you should complete. An intuitive interface will give you a hassle-free environment. Additionally, a demo account is another tool you must use to complete your first few trades.
Let’s have a descriptive view.
1. An intuitive platform -
Having a trading account is a must. As a trader, you need to take quick advantage if you plan to trade on the news. And it is only possible if you pick the right trading broker. The broker guarantees you quick execution of orders around the news events.
The fact of regulation is also a burning site.
Here is the list of some regulated platform that are leading the options world.
Demo trading facility
Low deposit amount
Leverage up to 1:100
Maximum payout 95%
Low deposit amount
Demo trading facility
Low deposit amount
2. Know which news to pick -
News trading is only effective if you know how to pick the most relevant news. You can find news and recent announcements on the economic calendar, one of the leading tools with clear and bold highlights.
3. Find the opportunity -
Not all news traders will be able to make money. You need to ensure your winning side. You can place trades before, during, or after the release, but make sure you don’t reap the reward.
4. Technical analysis -
You can hope for the light by incorporating technical analysis to build a news trading strategy for binary options. It is important to know how price action works. And only technical analysis tools can help you to identify price areas.
Why the Economic Calendar Is Important For News Traders?
Luck is not the pathfinder for traders. Professionals do not believe in luck. Moreover, they believe a trader can close a successful trade if he can properly blend all small trading tools like charts, economic calendars, trading journals, etc.
Each of these tools is equally significant. Among all trading tools, an economic calendar is a key tool for a trader to know what’s happening in the trading world.
As a news trader, it is like your white cane. To develop a news strategy, it is necessary to determine which events are worth trading.
Additionally, you can examine recent and future economic events to predict the particular underlying asset movement.
Apart from this, there are other benefits to note. Let’s have a look –
- Keep track of trading information like events, announcement
- Follow key economic and non-economic indicators
- Identify the major and minor news
Is News Strategy Suitable For Beginners?
Yes, traders of any experience level can trade on the news. You can create an excellent trading opportunity if you can overcome the barrier. However, this strategy is a bit risky.
So traders can blow away all obstacles if they remember to test the strategy on a demo account.
Pros Of News Trading Strategy
There are many reasons why people love to build binary options news strategies. Each benefit is proven with a calculative return.
- The market is active and highly volatile
- Fast price action
- Best for traders who are not comfortable with technical analysis
- Suitable for both short-term and long-term traders
Drawback Of The Binary Options News Trading Strategy
Taking precautions could save you money. You believe so, right? It is a profitable strategy doesn’t mean that it carries zero risk.
News trading strategy has several drawbacks:
- Not always easy to trade on unpredictable news
- It works best if you integrate it with technical analysis
- Need to have a good grasp of risk management
- Have the power to control trading emotions
No matter how good a strategy is, it still has some benefits and drawbacks. On the other hand, all strategy is a combination of two things: tactics and plans. You may have read that technical analysis is not completely required to formulate a news strategy.
However, if you combine technical analysis and fundamental analysis, you can hold your horses quite easily.