Binary Options on the news, part 1: news selection, calendar setting
- VFX Blog
- For beginners
The publication of important economic news and statistics always causes strong movements on financial assets, binary options signals stop working, Stop Loss orders are closed and other unpleasant events. At these moments, even experienced traders may want to completely stop using technical indicators and trade only on fundamental analysis. This will not be correct, see how to trade binary options on the news without errors.
Trading on the news is a very voluminous topic; let's divide the information into two parts. In the first part of the most important news, what information you need to collect before compiling the final list and properly configure the economic calendar. The second part will be trading strategies and recommendations.
All news strategies are based on regularly published macroeconomic indicators and statistics from leading countries, which will be the basis of fundamental analysis. In addition to the U.S. and the Eurozone countries, they include the United Kingdom, Canada, the Pacific region (Japan, Australia and New Zealand). Additionally, Asia should be analyzed, especially China, Hong Kong and Singapore.
What news to pay attention to
On the economic calendar every day you can see a lot of news and statistics of varying degrees of importance, we will not describe everything in detail. Interested will easily find the right materials on the Internet; describe only key events, for use in exact binary options strategy.
On any country first looks such information:
- Gross Domestic Product (GDP) – macroeconomic indicator representing a monetary measure of the market value of all final goods and services produced in a certain period of time (month, quarter, year). Growth of GDP strengthens the national currency, the decline weakens;
- Unemployment rate – is the number of unemployed as a percentage of the labour force for a certain period of time. It depends on the general state of the economy.
- Consumer price index – one of the types of price indices created to measure the average level of prices for goods and services (consumer basket) for a certain period in the economy. The growth of index indicates an improvement in the standard of living and the economy;
- Inflation – rising inflation leads to a weakening of the national currency;
- Central bank discount rate – one of the main parameters of the situation in the financial system. Raising rates leads to a strengthening of the national currency.
In addition to the key economic indicators in the best options trading platform, there are regional news and statistics such as DAX (Germany's main stock index) or Canadian Manufacturing PMI. Once again, the purpose of this article is to show the process of trading on news, and not to describe them in detail.
News selection criteria
After compiling a preliminary list of economic events for each looking for information on the price history:
Average volatility over the past 1-2 years;
The start time of market reaction to the news from the moment of its publication;
Market movement 20-30 minutes after publication, candlestick patterns and data of technical indicators;
Combine trading time and lifestyle. Example: if a trader lives in the European Region, and options open on news from Asia, you will have to trade at night. It’s not good for everyone.
The next step is to choose a tool that displays the publication time of major financial news. As an example (the information is not an advertisement or recommendation for use), economic calendar Investing.com with a simple interface and a minimum of settings:
- Register on the site and choose «Tools» = > «Economic Calendar».
- Select the time zone. Important note: the zone is selected based on the trading terminal time, which may differ from the local time. It is most convenient when the broker works on GMT, otherwise, add or subtract the desired number of hours.
3. Filter the list of displayed news. You need to choose the country, degree of importance ("strength") or news that will be used in binary options strategy. By default, the countries whose economies have the greatest impact on financial markets are already selected:
• Australia (AUD)
• New Zealand (NZD)
• United States (USD)
• Canada (CAD)
• Eurozone: Germany, France, Italy (EUR)
• United Kingdom (GBP)
• Switzerland (CHF)
• Japan (JPY)
• China (CNY)
• Hong Kong (HKD)
• Singapore (SGD)
It is recommended to disable the rest of the countries so that weak events do not interfere with binary options trading on the news. Let's move on to the most important parameter – the power of news. Scroll down the "Filters" page and select the following parameters:
- «Display time remaining until announcement» - how much time is left before the news is published, for example, «30 minutes»;
- «Display time only» - when there will be news according to the selected time zone. This is convenient for newbie’s, composing their first list of news and choosing the optimal trading time.
- «Category» - by default, all specified categories are displayed;
- «Importance» - selected the strongest news, leading to a sharp price impulse or trend reversal. Experienced traders can trade the news with medium volatility.
After clicking the “Apply” button, we get an economic calendar with individual settings:
Do not forget about pre-registration on the site, otherwise, the changes are not saved. Only the strongest event was selected so that beginners could learn to trade binary options on the news without mistakes. It is recommended to start with one country, such as the US or the UK, and only as experience and statistics accumulate the list of traded events and their degree of importance. News with one "bull" (the lowest importance) is not used.
In the second part how to use fundamental analysis in strategy for binary option and not make mistakes in real trading.