Just like any trading market, binary options market operation and its prices are affected by the news and events that occur anywhere across the globe. Binary options market might be subjected to fluctuations caused by the demand and supply. This demand and supply scenario develops according to the news.
Traders who are active in the binary options market are responsible for increase and decrease in the demand which causes the increase and decrease in market prices of assets. For example, if traders want to buy an asset it creates the demand for that asset making its price to rise. The type of news report that is issued at any moment is intricately tied to the demand and supply factor formulating in the market.
Positive and Negative News – Impact on the Binary Options
Depending on the type of news that hits the market, traders create their strategies. These strategies are influenced by the sentiment which is the result of the news. News can impact the sentiment of traders that builds confidence or causes fear in them. This forces them to buy assets or sell all of their holdings.
The negative news will cause traders to fear the direction of the market which will prompt them to sell all of their holdings. Bad economic reports, news that indicates political and economic uncertainty and any type of unexpected and unfortunate occurrence will create a selling pressure on the binary options traders. Being very dynamic, this market reacts swiftly to the negative news which results in the traders trying to save their investment by selling the assets. This causes the supply to increase and the market price drops quickly.
Positive news, on the other hand, builds confidence among the binary options traders. Positive political and economic news and events that are supposed to have a positive impact on the market will create a buying pressure on traders. This is because they believe the good news will cause the prices to shoot up. They try to buy as much as assets possible to gain from the upward movement of prices. The sudden purchasing spree of traders causes the demand for the asset to rise in the market and the market prices of that asset move up.
How can Traders benefit from the Impact of News on the Prices?
Traders can capitalise on the events and news. However, it is difficult as it requires sharp trading and analysing skills. The impact of new information released in the market depends on the how it will be perceived by the traders and how unexpected it was. Financial market trades are based on expectations of the future.
If any news supports the vision of profitable future and high closing prices, traders will buy assets to enhance their earning. But if you are a beginner in binary options trading, you need to focus on certain news rather than focusing on all news. Binary options market goes through a continuous change. Thus, new traders should concentrate on the unexpected news as they will create a deeper impact on a dynamic market like binary options.
Trading Binary Option on News and Events
Right from the very beginning of the binary options, trading on news and events is one of the most popular ways to trade them. It is also considered to be one of the easiest ways to trade binary options if beginners can keep a few points in mind. Experts suggest that traders must practice sharpening their trading skills in order to trade on news and events. This type of trading is suitable for traders with medium to high skill level. Newcomers can have a very hard time in identifying the news that will affect the prices and predict the movement of asset prices based on the news or special event.
Be Prepared for Extreme Price Fluctuations
As the market moves quickly after the news is issued, the value of assets can fluctuate suddenly, strongly making it unpredictable. Here are a few rules to deal with extreme fluctuations.
- Rule of 15-15 minute
Although the market is changing every second after the news, it is suggested that a trader should avoid entering a new trade or exit 15 minutes before and 15 minutes after the announcement of a news. This is because the maximum fluctuations occur during this time frame.
- Rule of 30-30 minute
Like 15 -15 minute rule, 30-30 minute rule forbids a trader from trading 30 minutes before and after the announcement of the news. This limit is, however, for inexperienced traders.
Once the news is broadcasted, the market moves very fast to accommodate the new information and change itself accordingly. This immediate change of market can even give the seasoned traders hard time in making future predictions. Confidence, skills and good analysis helps the traders to navigate their way to profits while trading on news.