One notorious issue with trading stocks through a binary options broker is the fact that you are not given access to short term trading during the first 30 minutes of every trading day. This happens so that binary brokers can protect themselves. This is often the period of the day where stock price action is at its most predictable. While stock trading is only available at certain times of the day, there is no limit put upon the information that comes out. Most companies, for example, will wait to release major pieces of information and any earnings data until the end of the closing day. When this happens, stock prices will adjust quickly and accordingly when the markets are next open. By the time most binary brokers give you access to trading, the corrections have been made and prices are much more efficient.
It makes trading the news more difficult, but certainly not impossible. The reason why many people fail, though, is that they are not getting technical enough. Binary options are set so that you can be right most of the time, and still lose money. The gap between your profit rate and your loss rate at most brokers is large enough that even if you’re predictions are right 55 percent of the time, you’ll still lose money. Most people don’t consider this, and therefore, most people lose money.
You don’t want to lose money. That’s why you’re in trading; you want to make money. Equipping yourself to do so is a must, then.
Because the bulk of easily predictable action takes place before you can profit off of it, you can either find a different way to trade (day trading in the stock market, for example), or use a different method to predict price movement. The latter allows you to stay in the binary options market and still use the protection and high rates per trade that come with it.
To stay in the market and still profit with news trading, you need to know the general direction that you should be trading based upon the news provided, but you also need to time your trades right through the use of short term technical indicators. There are many of these to choose from and some are more effective than others. As we already know the general trend of the asset thanks to the news and the background information we already have collected, we should be focusing on a momentum indicator. To be even more specific, we want leading indicators rather than lagging indicators as we are trying to predict the future and the past is not as important because of the news events that have recently transpired. Some of the more widely used of these include the relative strength indicator (RSI), commodity channel index (CCI), and the stochastic oscillator.
If you are going off of news, you will want to focus on short term trades, typically less than an hour in length between execution and expiration. If you are going to trade 5 minute expiries, be sure to use indicators that reflect this. You will want to break things down in 5 minute increments, of course, but also take a look above and below your timeframe of choice. This could mean 60 second and 10 minute looks. To do this, you need proper software. First, it needs to be in real time. If you are trading currency pairs, you can get the right software for free with MetaTrader 4. For stocks and commodities, though, you will most likely need to purchase the software so that you can watch and chart second by second trades in real time. The amount that you pay will vary based upon how complex the software you need is. Since we are focusing on stocks, be prepared to pay. If you are doing it right though, the cost will easily be made up with a few choice trades.
Trading the news is not as easy as it could be with binary options and stocks, but it is still very lucrative when you have the right strategy and the right tools.
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Between 74-89 % of retail investor accounts lose money when trading CFDs