Trading on news and events is actually not recommended for beginners. Should you be a beginner, it’s best to try out some other Trading Binary Options for beginners first like Money Management.
Making a prediction of markets is almost impossible immediately before and after the release of a huge news event that’s related to some assets. Only experienced traders have the confidence to make trades like this.
High Price Fluctuations
The biggest reason why beginners shouldn’t trade on news, is because the value of an asset can fluctuate very strongly before and after a major event takes place. In stations like this, movement of the asset is almost never predictable.
In most cases, even experts aren’t sure what the right choice is. Trading on news and events becomes so much easier after some time passes after an event. Here are some tips on trading on news and different types of events.
15 15-minute rule
Not only can the value of an asset fluctuate before an event, but also shortly before the event takes place. In cases where the event was planned and announced for example.
Should you be an experienced but impatient trader, don’t trade 15 minutes before and after an event. During times like these, market movements are hard to predict due to the number of trades performed by others, mostly beginners who have no clue.
It’s during times like these that super massive price fluctuations take place in short time frames and they won’t make sense at all. So avoid trading 15 minutes before and after an event takes place.
30 30-minute rule
If you are a medium skilled trader and have a bit more patience, then don’t trade 30 minutes before or after an event involving an asset after that event took place.
For the same reason mentioned above, price fluctuations are heavy 15-minutes before and after. Should you not be an expert, avoid trading during these time frames.
How to Trade On News and Events
Now that you know the time frames to avoid, but not when is the best time to cash in large amounts of money. So listen closely! You’ll have the most optimal winning chances to cash in large amounts of money when start trading before or after the 30-minute mark.
No you know which time frames to avoid but you still don’t know when you’ll have the best chance to cash in large amounts of money when trading on news and events.
So 30-minutes before an event takes place there are consensus about the nature of an event. If Apple is about to launch a new product in a few hours, most people assume it’ll be a good product and bump up Apple’s stock.
It’s likely that Apple’s stock will increase during this time frame so you’ll be able to buy an appropriate option contract but, 30 minutes before a product launch this will go crazy. People begin to speculate, buy, sell and so the company’s stock prices jump around heavily.
Then again, 30 minutes after the event is going on, many speculators are still actively trading. This results in the value of the asset jumping around all the time and seemingly without any logic at all.
After the initial 30 minutes, the asset will start stabilising and either continue to increase or decrease. That’s because, 30 minutes into an event like a product launch, people will already be able to calculate the nature of the event.
That means in the case of an Apple product launch, 30 minutes into the launch you’ll already be able to tell the quality of the product launched. SO when you see Apple releasing something great, you know that the value of Apple’s stock will increase.
But, if the product sucks or nothing big was released, then you know that the value of the company will decrease and so, you’ll be able to make the right predictions and earn a lot of money.
Trading Binary Options on Currencies
So many people make trades based on the news involving currencies. One of the best ways of doing this is to trade on Non-farm Payroll reports released by the US Department of Labour every 3rd Friday of every month.
This report is a statistic of the US non-farm labour force during the previous month. It reveals how many new jobs were created or lost during the previous month.
This report always influences the conversion rate of the USD compared to other currencies. So there are 2 scenarios to that into consideration:
Plenty of new jobs created the month before:
The USD will increase in value. In this case, you should make a prediction according to which the USD/xxx (xxx is any other currency) exchange rate will decrease as the USD became stronger due to the consequence that more investors invested in the USD knowing that the US economy was boosted the previous month due to new jobs.
Many jobs have been lost the month before:
Here the value of the USD will drop due to the loss of jobs pointed out a stagnation/decrease in economic output. In this case, you should buy a binary options contract that predicts the value of the USD/xxx exchange rate increases, meaning the USD will perform poor.
Trading Binary Options news on stocks
As discussed before, this involves company product launches. If, the general consensus thinks that the next product launch will be successful, then the stocks are expected to increase.
If around 30 minutes after the product launch it becomes evident that the new product launched is great, the value of the company will naturally increase. You’ll have an easy time making good predictions in these cases.
As explained before, avoid trading either 30 or 15 minutes before a product launch and 15 or 30 minutes after a product launch. This advice is extremely important!
This is how you trade binary options based on news, product launches and other types of events. If you are a total newcomer, then perhaps you should wait before on news in the very beginning. Gather some experience with other strategies first.
To learn more about beginner strategies, read about Money Management Strategies (hyperlink to this article) and start applying them today. You’ll be very glad you read it.
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