Trading the News: The Cyclical Strategy for Identifying Bullish Patterns in Binary Options
Trading the News: The Cyclical Strategy for Identifying Bullish Patterns in Binary OptionsFebruary 1, 2013
Seasoned binary options traders know that there are certain dates or events that have a repetitive or cyclical nature, and once these events take place the market reactions are almost always the same. This makes things more or less predictable, and this is also when opportunity presents itself and a lot of money can be made. The only thing that’s left is to identify the entry points, beware of traps, and have a reversal (exit) strategy ready.
Non Farm Payrolls: The non-farm payroll employment report is a seasonal report indicating a rise or decline in total non-farm household income. Based on this report you can formulate your trading strategy, as it is considered by many professionals to be one good indication of how markets will react. A rise in salaries would tend to be an indication of a bullish market, where a decrease usually hints of a more bearish trend. The next report is scheduled for release by the US Bureau of Labor Statistics on February 1, 2013 and is divided according to industry. For example, if salaries in in the Oil sector peaked, then this may be a good indication of what is about to happen to my XOM stock.
The NFP report also has a significant influence on USD/EUR currency pairs trading. To demonstrate, if there is a boost in salaries in the pharmaceutical industry, foreign investors may decide to risk their EUR or GBP in a company such as PFE, and those will be devalued compared to the greenback. If you are looking for entry and/or exit points, the February report is not going to be around the 155,000 mark.
Middle East Skirmishes: In my article on Seeking Alpha dated November 28, 2012 I explain how oil markets react to regional conflicts in the Middle East. As I mention, November 14th 2012 was the first day of Operation “Pillar of Cloud” which signaled the
start of a regional conflict between the Israelis and the Palestinians. Screenshot A illustrates the predictable market jitters and how local scuffles increase the prices of Brent Crude immediately. If you are trading Light Sweet Crude on Traderush and CNN just announced rockets were fired from Gaza towards Tel Aviv, naturally you would choose the Call option because you know prices are bound to go up.
National Holidays: National or official holidays such as Christmas or Thanksgiving are days where trading volume is low because its considered to be days that are spent with the family. However, the days before and after Christmas are days that are usually characterized by increase retail sales (gifts for the holidays). So let’s say you are trading NKE stock on 24option and its 2 days before Christmas sets in, you can pretty much guess that stock is going up.
New Governments Sworn in: Let’s say a new Spanish government has just been sworn in and they are led by a majority leader considered to be the sweetheart of the investment community. You can pretty much guess the IBEX 35 on Anyoption is going up and its time to invest in Spain.
Natural Disasters: These are my personal favorite because they are the most predictable. Take for example the drought of 2012 and the adverse effect it had on livestock production. So if drought caused beef prices to soar you can pretty much bet that your MCD stock is going to take a hit due to increased expenditures. Although this may be offset if they have large amounts of frozen beef to help them get past the increase demand.
Home Sales: The Home Sales report is indicative of the mortgage market as well as investments in the housing and construction industry. But the housing industry has a massive ripple effect on secondary industries, such as concrete, wood, tile, copper, gardening, asphalt, as well as other contracting sectors. A robust housing and real estate sector sends a strong signal as to the state of the economy and predicted growth.
Initial Jobless Claims (Department of Labor): Seasonal jobless claims as updated by the Labor Department are also a growth indicator used by investors to get a feel for the economic state of of affairs. If seasonally adjusted initial claims grow, so does the exposure on inflationary parameters since unemployment is considered to be a crucial determinant of a rising inflation. So technically speaking, if you are trading forex binary options and identify a particularly good claims report that has just been publicized, you can bet your bottom dollar this will impact USD/EUR margins as well as government bond trading.
Consumer Price Index: This index is probably the most important consumer-related index since it outlines data on a monthly basis relating to price changes paid by urban consumers for a representative basket of goods and services. The next release is scheduled for February 21, 2013. Its important to note that mortgages, loans, contracts, and business agreements use this index as a point of reference to counter inflation-induced currency changes. In other words, its not just a measure of the economy but also a financial tool used by bankers and businesses to hedge their risk. If the index shows a rise, it means people will pay more on their loans and have less money to spend or vice versa.
There is a plethora of other economic events that are seasonal and/or cyclical. It’s imperative to have a good understanding of all the major economic events and their influence on trading. So before you take out your Amex gold card and take a position with a binary options broker you must start reading economic data.For starters I recommend The Wall Street Journal, Kiplinger, CNN Finance, Bloomberg, and at have at least 5 trading blogs such as this on your arsenal as well. Your understanding of the global economy will serve as a crucial component in your ability to make an intelligent and focused strategic trading decision in a real time environment.