Besides the huge profit potential, trading on the news is one of the simplest trading strategies. And if you are a new trader and don’t know which system to choose to start, without a doubt, choose news trading! And now, you will see just how easy and profitable it is.
The technology of trading on the news
The idea of trading on the news is that a trader enters into transactions in the direction in which the asset quotes will move with a probability of more than 80%. Where does this confidence that the price will move in that direction come from? It comes from the fact that the signals for registering transactions are news releases in the macroeconomic calendar of the financial market, which is used by all participants in exchange trading.
This calendar has the agreed times and days of releases of macroeconomic reports from central banks, ministries of economy, energy, and labor, and other government agencies around the world, and they are the main fundamental factor moving quote assets, and creating supply and demand in the financial markets.
And in order to trade profitably on the macroeconomic news, you need to learn the mechanism of the effect of news on the value of assets. This is what we will now teach you.
How to analyze the macroeconomic calendar
You can find the macroeconomic calendar on most finance-oriented portals. And the calendar itself is a table arranged in chronological order showing news of the financial market with the following information: the exact release time of the news, the date and day of the week, the degree of importance of the news, a brief description, and the previous values of statistical data, forecasts, and the exchange asset, to which the macroeconomic news relate:
The most important graph is the graph of the actual result of the release of macroeconomic news, in which the statistical significance of the macroeconomic news appears automatically at the appointed time. Precisely this value is taken to determine the direction in which to trade binary options.
- If the actual value of the macroeconomic news comes out better than the forecasts, the exchange asset indicated in the calendar begins to rise in price.
- If the news comes out worse than expected, the exchange asset begins to depreciate.
- If the news comes out in line with expectations, most often the stock asset will continue to be quoted without significant changes in its value.
How to trade binary options on the news
- First of all, you must remember that it is necessary to choose only the most important macroeconomic news releases that the calendar marks with three stars (or three bullheads). Precisely these news releases have the greatest impact on the financial market, and after their release significant price changes have been observed on “dependent” quote assets:
- On the macroeconomic calendar, news comes out at exactly the appointed time, but the trader must be ready to trade in advance by opening the macroeconomic calendar and platform for trading binary options 2-3 minutes before the news release. Because, if you are even 5-10 seconds late, the transaction will be too late. Most often, asset quotes “fly away” during that time, and entering the market would be pointless.
- All trading comes down to waiting for news in the macroeconomic calendar to be released, instantly comparing it to the actual value of the forecast and, without losing a second, conclude a binary options transaction in the right direction.
- The trading direction is determined as follows:
If the news comes out better than the forecast, then the following will happen (for the USD currency example):
- Currency pairs where USD is first (the base currency) begin to move upwards (USDCAD, USDJPY, USDCHF, etc.).
- Currency pairs where USD is second (the counter currency) begin to move downwards (EURUSD, NZDUSD, AUDUSD, GBPUSD, etc.)
If the news comes out worse than the forecast, then the following will happen (for the USD currency example):
- Currency pairs where USD is first (the base currency) begin to move downwards (USDCAD, USDJPY, USDCHF, etc.).
- Currency pairs where USD is second (the counter currency) begin to move upwards (EURUSD, NZDUSD, AUDUSD, GBPUSD, etc.)
If the news comes out as forecasted, it’s better to abstain from trading.
The outcome of trading on the news
Provided that macroeconomic news is precisely the factor that controls supply and demand in the financial market, more than 60% of professional participants of exchange trading engage in trading on the news. Immediately after the release of news on the market, hundreds of thousands of transactions are concluded with large volumes. Therefore, asset quotes also begin to move wildly. Then again, it is all on the options trader’s hands. After all, rapid and irretrievable price movement in one direction is a guarantee that quotes will not return. So, by correctly identifying the output result of the news, and concluding a transaction in the right direction, the trader, in most cases, will make a profit. In other words, trading on the news is the easiest and most effective way to trade binary options and earn!