Welcome to Binary Options 208, Trading the News Part 2. This is video number eight in our binary options 200 series, brought to you by binaryoptions.education. This video is a follow on from Binary Options 112, which was Trading the News Part 1. This video follows on from that video, so if you haven’t watched Binary Options 112, then I suggest, you go back and watch that video and then come back to this one.
As a financial trader, you have a number of options when it comes to trading scheduled news events. First of all, you can be purely technical and ignore scheduled news events and take every day as it comes, and rely on technical analysis. Or you can pay attention to when scheduled news events are and decide not to trade before and during those scheduled news events.
And then your third option is to trade news events. If you decide to trade news events and hopefully this video is going to be of great used to you. I wouldn’t suggest completely ignoring scheduled news events because price can be very volatile during news events, and can quickly move against you.
My suggestion to you would be either to trade news events or to not trade at all during these events. If we compare binary options to other sorts of trading, such as trading on an exchange or CFD trading, binary options does have an advantage, when it comes to news events.
As mentioned, price is highly volatile during news events. And if we were to hold a position within a financial market, prices could move drastically against us and we could end up losing a lot of money, whereas with binary options, even though price is highly volatile during a news event, we still have that simple option of placing a call or put. And our risk is limited.
So my recommendations for trading scheduled news events are one, use an economic or fundamental calendar and I’ll show you one in this video, and two, react quickly to scheduled news events. And once again, I’ll go into more detail about this as this video progresses.
Before I bring up some charts and an economic calendar, it’s important that I just go over the basics of how the news can impact currency pairs. Negative news can weaken particular currencies for example, negative news in Great Britain can weaken the pound and positive news can strengthen particular currencies.
By now, you should know that currencies are traded in pairs, we have a currency pair in this illustration it’s the you euro, US dollar, or the euro against the US dollar. The first currency in the pair is referred to as the base currency and has the value of one, when we have a quoted price.
So if the quoted price for the euro USD is currently 1.3500, that means that for one euro, which is our base currency, we would get 1.3500 US dollars. If we had the pound against the US dollar and the quoted price was 1.6550, that would mean that one pound is worth 1.6650 US dollars.
That second currency in the currency pair is referred to as the quote currency. When the base currency is strengthened the pair price rates will likely rise. If the euro is gaining strength, then our euro could be worth more US dollars. So if the euro is strengthening, we may see price case 1.35100. If the euro is being weakened, the pair price rates may fall. So if the euro is getting weak, price may fall down to 1.3400.
With a quote currency price is the opposite. So if the US dollar is being strengthened then our one euro is going to be worth less US dollars. And if the US dollar is weakened, than pair price rates will rise. Scheduled news events usually have four forecasted figures previously reported figures and this will make more sense, as I show you an economic calendar.
Trading News involves reacting to the actual announced figures and comparing these figures to the forecast and previous figures. If that doesn’t make sense then it will as this video goes on, and we move on to the economic calendar. And not all scheduled news events will have a major impact on the financial markets .
This is an economic calendar or fundamental calendar brought to you by 4 X factory dot com. If you go to Google or any search engine and type in 4 x news or 4x economic calendar, there’ll be a number of sites you can use to access a calendar similar to this.
With each calendar you should have a date and then a list of scheduled news events. With each news event we have the time of the news event, the currency it will impact, the strength of the impact. With the 4x factory economic calendar, you have yellow for minor impact, red for major impact, and then our orange for medium impact.
The name of the news event and then we have the actual announced figure. Obviously this column is blank until these figures are announced, for cost figure and previous figure. So I will give you some tips about trading the news.
First of all, trade only news events that have a high or major impact on financial markets. So if we’re looking at yesterday, which is the 21st of March, you’ll notice there are two news events here that have a high impact for the Canadian dollar, and one down here for the US dollar.
My second tip or bit of advice is to only trade news events that even dummies will get right. And this will make more sense as this video goes on. But let me demonstrate this with these two news events for the Canadian dollar at 8:30.
Now in a general sense, and please take this very loosely the higher the figures for scheduled news events generally, and once again very loosely, this is positive for the currency under influence. If figures are lower, this generally has a weakening effect on the currency under influence. So let’s take this first news event, which is CPI, high impact, 8:30.
The previous figure was not 0.2% and we forecast not 0.5%. So we forecast a better figure then what was previous, which is a good sign for the Canadian dollar. When the actual figure is announced, it’s not 0.7, so even better, than what is forecast. So very strong sign for the Canadian dollar. And this is what I mean by news events that even dummies could read.
Our previous was not 0.2, with forecast not 0.5, which is better. And we actually come in at not 0.7, a strong signal that the Canadian dollar is going to strengthen. Let’s look at our second scheduled news event at the same time. This is retail sales once again, has a major impact.
Previous was minus 1.5 once again with forecast better at not 0.9, which is a good sign for the Canadian dollar. And we actually come at 1%. So even better than what is forecast. We have two news events here that are clear signs the Canadian dollar could strengthen.
These are perfect news events to trade. So let’s look at the US dollar, Canadian dollar, and see how price reacted at this time when these news events were announced. This was last Friday, Friday the 21st of March at 8:30. This is New York time, there’s currently a four hour difference between New York and London. So on our price charts it will be 12:30.
This is the US dollar, Canadian dollar. It’s a five minute chart. This is the 12:30 candle just opening here. And price clearly fell on the downside. If we would have reacted to the news and placed a put, we would easily of made a profit. Now you may wonder why price fell when the news was so good. But please remember, this is the US dollar, Canadian dollar.
The Canadian dollar is the quote currency so positive news brings price down. If it was the Canadian dollar, US dollar, then positive news for the Canadian dollar would have pushed price up. So a nice simple trade.
Let’s look at some more demonstrations. Let’s go back a day to the 20th of March and see what we have on this day. We have quite a few major impact news events. This one, there are no figures because it’s a governor speaking from the Bank of Japan. I personally wouldn’t have traded this as mentioned, I’m interested in a nice, easy news events setups.
We have a couple here for the Swiss Franc, once again no figures for this one. And this [? liberate, ?] we have the previous figure and a forecast figure, which are the same, so it’s not looking too promising even before the actual figure is announced and when it is, it’s the same again. So I would not have traded that news events.
Let’s see what else we have. Three here for the US dollar. Let’s take these two at 10:00am to high impact, exist in home sales and manufacturing index. Home sales previous 4.62 forecast better at 4.65. And the actual comes in a 4.6, which is worse than the forecast and worse in the previous. So this is not looking good for the US dollar, that the US dollar may weaken.
Manufacturing index minus 6.3 forecast a lot better at 4.2. And then actual comes back even better at 9. So it made a sign that the US dollar may strengthen. Now we have two conflicting news events here. One saying the US dollar may weaken. One saying the US dollar may strengthen if we have conflicting news events.
In my opinion, it’s better to take a step back and not get involved. But let’s look at this on a price chart. Let’s stick with the US dollar, Canadian dollar. So 10:00am New York Time so two o’clock London time. So that’s go a day back and 2 o’clock here we go.
So we have this big pen bar appear. We could have traded off to the news event and placed a put off that pen bar as price fell on the downside. You’ll see no major movements in one particular direction because those conflict between the news events. And we’re looking for news events that even dummies can trade. Let’s go back another day. Let’s go to the 19th of March.
Let’s take a news event a dummy to trade. This one here, New Zealand dollar 545 so 945 here in London. GDP it’s high impact. That’s what we want. Previous 1.2% forecast 1%, so we forecast worse then what we were previous. It’s not a good sign for the New Zealand dollar.
And our actual comes an even lower. So a very poor sign for the New Zealand dollar. The New Zealand dollar could really weaken. Let’s find a price chart. Let’s go to the New Zealand dollar, US dollar. Stick with the five minute charts.
I believe on the 19th at 9:45. So just here, and price clearly fall strongly on the downside. The New Zealand dollar is the base currency. So negative news brings price down. And price fell strongly on the downside. It’s as easy as that. The key is to trade high impact, news events, and trade those news events that are easy to read.
You have to exercise some self discipline and not get involved in some news events. But these events are scheduled every single day. So there’s plenty of opportunities and there are plenty of good or strong news events to get involved in.
As always thank you for watching. Please check out our website binaryoptions.education. If you’re thinking about opening a Binary Options account, please check out our video Binary Options 102 or visit brokers.