Trading binary options based on news is a complex analytical process. However, when the forecast is accurate, this method can generate higher profits more quickly than standard binary options trading. Specific strategies are recommended for this approach, though they are not always effective in regular trading conditions.
News-based trading also requires specific experience and knowledge, making it unsuitable for beginners. This article covers the topic in detail and explains how to trade binary options on news correctly.
Contents:
- Economic Calendar in Binary Options News Trading;
- Preparing to Trade Binary Options News;
- How to Choose Currency Pairs for Binary Options News Trading;
- The Most Important Types of News in Binary Options Trading;
- Trading News on Binary Options: Strategies;
- Examples of Trading Using a Breakout Strategy;
- Which Broker to Choose for Binary Options News Trading;
- Conclusion.
Economic Calendar in Binary Options News Trading
News trading in binary options differs from standard trading in that traders must set aside most technical analysis methods and shift to fundamental analysis. In this context, an economic calendar is an essential tool. It provides a schedule of important news releases that affect asset prices:
Technical analysis loses its effectiveness around news events because prices begin moving under the influence of a large number of traders acting simultaneously. This causes volatility to spike sharply and prices to move unpredictably, which is why signals from binary options indicators lose their reliability. That said, it is still possible to profit from news events. With the right approach, gains can be made in a relatively short window of time — though traders must keep in mind that trades become significantly riskier around such events.
Because of this elevated risk, some traders choose to avoid news-based trading entirely, preferring to operate in more predictable conditions with stable, well-defined trends.
The economic calendar is an indispensable resource for news traders, offering a wide range of useful information. It shows:
- news release time;
- the country to which the published data belongs;
- the importance of the release;
- the name of the news event;
- key figures (previous, forecast, and actual values).
Using this information, traders can identify releases with a high probability of generating a tradeable move.
Preparing to Trade Binary Options News
This type of analysis begins with studying the historical data for a specific news release. This information can be accessed by clicking on the relevant indicator. As an example, let's look at "Employment Change" in Canada for February:
Note: The economic calendar used in this article is from Investing.com.
Clicking on this event opens a page with a full description of the release, including its definition and other relevant details:
Below the chart you will find historical data for the release. When reviewing this data, pay attention to the actual value, the forecast, and the previous value. The key step is to compare the forecast with the figure that was ultimately reported. In the example above, the top row shows that the previous figure was 200.1K and the actual figure came in at 336.6K — significantly above the forecast of 160K:
Based on the forecast, the figure was expected to fall from 200.1K to 160K. Instead, employment increased substantially. Both the expected and actual outcomes were positive for the Canadian dollar and negative for the US dollar. Since the US dollar is the base currency in the USD/CAD currency pair, the pair's chart showed a decline:
For ease of reading, the figures are colour-coded: green for a rise, red for a fall, and grey for the forecast.
As an illustration of how outcomes can vary, consider the US non-farm payrolls release. In November 2017, the previous value was 18K. Analysts forecast growth to 310K, but the actual figure came in at 261K:
The actual figure came in below the forecast — but in absolute terms, employment had still grown significantly, from 18K to 261K. This should have supported the dollar. Initially, the EUR/USD pair moved upward, as many traders focused on the miss relative to expectations. Shortly after, however, a sharp correction followed and the price reversed:
This illustrates why less experienced traders can misread news events — focusing only on the colour coding rather than analysing the underlying figures.
It is also important to understand that forecasts are not always reliable. The data for June 2, 2017 and October 7, 2016 both illustrate this: in each case, an increase was forecast, but the actual result was a decline, which pushed quotes lower:
For this reason, it is also recommended to compare previous and actual values during analysis. Over time, this can help identify the prevailing direction of a trend for a specific asset. However, this should be approached carefully, and a full statistical history of a news release should be reviewed before drawing conclusions.
How to Choose Currency Pairs for Binary Options News Trading
For successful news-based binary options trading, focus on the following currencies:
- USD
- EUR
- CAD
- CHF
- AUD
- GBP
- JPY
- NZD
Trade currency pairs that include at least one of these currencies, as they are the major players in the global economy. Keep in mind that the US dollar has a strong influence on many other currencies, while some correlate with it negatively. When entering trades, pay particular attention to news releases relating to the US dollar, as these events can affect the entire market.
Success in news trading depends directly on the trader's ability to analyse several factors. When forecasting price direction, it is also useful to consider the following technical factors:
- supply and demand;
- trend;
- graphical analysis;
- candlestick analysis.
When multiple events are scheduled at the same time, filter out the lower-importance releases and focus the analysis on the most significant ones.
The Most Important Types of News in Binary Options Trading
When trading binary options based on news, it is important to know which releases deserve the most attention. The following are the events most likely to move prices significantly:
- Non-farm payrolls (change in non-agricultural employment). Higher employment levels mean greater productive capacity in exports and other goods, which directly affects GDP.
- Central bank interest rate decisions (US Federal Reserve and other regulators) affect the entire national economy. Raising rates reduces inflation but also slows financial activity. Cutting rates encourages lending, which supports business activity.
- Retail sales. This indicator measures the total volume of household spending in a given country.
- Inflation. This indicator reflects the direction of change in a country's economy. Rising inflation reduces consumption, which negatively affects money flows and budget revenues — pushing quotes lower. The opposite dynamic leads to an increase in the exchange rate.
- Unemployment claims. Low employment levels prevent an economy from reaching its full productive potential.
- Business sentiment index. This indicator reflects current business activity and the forward-looking expectations of company management. An increase in the index tends to support the national currency.
The relative importance of these indicators shifts depending on the state of the economy. For example, if analysts are expecting a significant rise in unemployment, the release of that data may carry more weight than an interest rate decision.
Trading News on Binary Options: Strategies
Traders use a variety of strategies for news-based binary options trading. Volatility trading, however, is the simplest and most widely used approach.
Despite requiring preparation and a degree of experience, this method can be among the fastest and most profitable when executed correctly. A well-structured strategy leaves little room for error. The key is to identify news releases that are likely to maximise volatility and drive prices decisively in one direction.
Examples of such releases include:
- Non-farm payrolls
- Interest rate decisions
- Unemployment rate
However, do not open trades when two or more conflicting news releases are scheduled simultaneously — though this is rare. In such conditions, the price is likely to move in both directions, leaving long wicks on the candles and preventing a clean directional move.
With this approach, the option type is chosen based on the direction of price movement: upward movement calls for a Call option, downward movement for a Put. Non-standard option types such as "Range" can also be used. Trades should be opened immediately after the news release or when the market reacts to the key figures. The expiration time should not exceed 30 minutes. For moderate-impact releases, expiration should be no longer than 15 minutes.
Examples of Trading Using a Breakout Strategy
To illustrate volatility trading, consider a release of US non-farm payroll data. In the calendar, you can see that several other US events are scheduled at the same time, but these can be disregarded as they are far less significant than the non-farm payrolls release. The forecast for the number of new jobs was 150K. The previous figure was 510K. The actual figure of 467K came in well above expectations but below the prior reading. This suggests lower gross output going forward, which is negative for the dollar — so a decline in the currency should be expected:
Following the strategy outlined above, the next step is to select a currency pair that includes the dollar. This could be any dollar pair, such as USD/JPY, but EUR/USD is generally preferable due to its higher liquidity and volatility. Since the dollar is the quote currency in EUR/USD (not the base), a falling dollar means the euro rises — so a Call ("Higher") option is appropriate. If the dollar were the base currency (as in a hypothetical USD/EUR pair), we would instead see a decline on the chart. As discussed, the expiration time in this case should be 30 minutes. The chart below shows the market's reaction to the news and the potential trade setup:
The release triggered a strong price impulse of more than 100 points, with the upward move continuing even beyond the 30-minute expiration window.
All other news events are traded using the same principle — the key is always to focus on high-impact releases.
Which Broker to Choose for Binary Options News Trading
Almost all binary options brokers support this trading approach. However, brokers that offer instant trade execution are the better choice for news trading.
Quotex and Pocket Option both fall into this category. With these brokers, trades do not require manual confirmation, reducing the time needed to enter a position. Both platforms also allow trading in high-volatility conditions.
Another advantage is the ability to add assets to the watchlist panel, making it easy to switch between currency pairs. Additionally, Quotex offers fixed payouts on EUR/USD and GBP/USD at certain times, which do not change during the trading window.
Conclusion
News-based trading in binary options is a way to profit from rapid currency rate movements. However, it carries elevated risk. A solid grounding in fundamental analysis is therefore essential before attempting this approach. Keep in mind that a single major release can affect multiple financial assets simultaneously. To minimise errors, open positions only when a high-impact event is published.
To leave a comment, you must register or log in to your account.