Time Based Trading Strategies


Best Times to Trade
These days, many of the most liquid financial markets trade 24 hours a day. But you need to know the best times to trade your asset to make the most consistent profits. So what times are best? That depends on the asset. In general, you want to select a time when the largest number of market participants will be awake, at work, and engaged in trading. This will mean you have the most liquidity and the most consistent, predictable markets. During off hours, a single trade can move the market and negatively impact your binary options trade.

For example, I trade the currency pair EUR/USD. This currency pair is traded throughout the world, but primarily out of New York and London. The best time to trade this pair is during the time 8am to 11am New York time. That is because both New York and London forex markets are open during those times, so there is overlap in the trading hours. Within that timeframe, US economic news is often released, and that news can move the market. For that reason, I always check the economic calendar to be aware of any expected news. I also make sure to watch the news for any unexpected announcements and events.

You might trade EUR/USD, or you might trade another currency pair or even another asset class. The concept is the same. Make sure you know the primary market for your asset and the trading hours for that market. If there is more than one market, make sure you focus on the overlap between the markets (if any). Then, be aware of any news that may move your asset.

Market Open and Close
Another aspect to time is the price action around the open and close of the market for your asset. Right after the open, traders get their first chance to trade with all the information from the night (or from the weekend). If pre-market trends look strong, for example, based on positive economic news, I will often bet on the momentum continuing by buying binary calls. This opening momentum typically lasts at least for the first 5-10 minutes, so I will make money on my call positions. If there is no significant news and the market is moving slightly higher, I will often bet that the trend will reverse by buying binary puts. Binary options are great because they are fast. I often trade the S&P, and on this particular day I knew an economic news announcement was due at 10:00am:

I had only 30 minutes to trade it. Right after the open, the market was headed higher with no news yet. When the market traded above the highest level from the pre-market, I bought a binary put expiring prior to the announcement. Sure enough, the trend reversed and I was able to bank a quick profit before the announcement.

And heading into the close traders are rushing to get their last-minute trades in before the night (or weekend). Typically anything within 30 minutes to an hour ahead of the close can be considered a close-based trade. For close-based trades, you have more information from the day’s price action. The key is to determine the relevant trend, and whether it will continue. Here again is the S&P and this is a Friday ahead of a long weekend, so traders will want to make sure their books are positioned properly before they head for their vacations:

Looking at the day, the market had failed to break above the prior day’s close, the top vertical line. Later it broke above, but quickly lost steam. The third time it approached that level, it failed and the trend was set for the afternoon. I was able to place a few put trades based on that bearish trend. The first when it clearly failed at unchanged. I entered the second trade when the market broke support defined by the morning’s price action. And I entered the third put trade when it failed again at that level. Note that if the trend had broken and I had lost money on any one of my trades, I would have stopped trading that trend. You have to be able to recognize when trends begin and when they end.

Binary options are unique because they have very short time horizons. This means you can take advantage of information and price action at many different points during the day. Understanding time and how the clock impacts your assets can help you tremendously in your binary options trading strategy.

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