New comers to the binary trading scene can usually be separated in two distinct groups.
The first group is the one that relies heavily on indicators. They are incredibly attracted by the fact that some lines plotted on a chart can show them the way to the riches. They tend to learn everything they can about indicators, Fibonacci sequences and other magic numbers.
The second group is the one that relies on what we call fundamentals. They tend to follow the news, watch for big announcements, and overall make “gut” decisions based on all the information that’s out there.
In this article, we’re going to go over trading the news, which is something most people from the second group do. The idea is simply to profit from the craziness of a news announcement. Seems simple, right?
Trading the news, not as easy as it sounds
Let’s get this out of the way early, before we get to the actual strategy. Trading the news is not easy. It’s incredibly high variance. There is a very simple reason for that: most traders don’t have a clue of how the market is going to react to a piece of news.
There is pretty much no logic to market reactions when it comes to news releases. Where a beginner might see a good news, the trained eye might see very bad news for a company. Where a country can get a piece of good news, another country can see the same piece of news as very bad.
The point I’m making is that you shouldn’t rely on what you expect the market to do once a piece of news is released. Pretty much no one knows, even the smartest of smartest computers built by the smartest of smartest scientists whom are paid millions of dollars every month.
Some good news (sic) still
Good news (again with the pun?), there is a way to trade news releases profitably. For this strategy, you’ll need to download a charting software, any will do.
Simply open the chart of an asset that is connected to the news release. If the news is about Apple Inc, pull out APPL. If the news is about the US, pull out EUR/USD or USD/JPY. Set the chart to 5 minutes, and your binary platform to 5 minute expiries.
Before placing an entry, you’ll have to be patient. I know, it’s dreadful, but that’s the best way to avoid all the noise and craziness. Note the exact time at which the news will be released. Once that time has come, watch the market go crazy for a full 5 minutes without entering a position. Sit back, relax, and watch people lose their money.
As soon as the 5 minutes candle closes, place a binary trade in the direction of the closed candle. If the candle closed green (up), place a buy trade. If the candle closed red (down), place a sell trade. Set the expiry time to 5 minutes, and sit back again.
This simple strategy relies on the momentum created by the piece of news, and should bank you some decent cash!