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Using a Good News Strategy

One of the best binary options trading strategies involves looking at major news events and forming a short term approach off of that info. It is a strategy that needs an understanding of trader psychology, and this takes some time to learn well, although for most, the basics are pretty common sense. Let’s outline a brief system for utilizing this strategy. Traders all over use this, but it is at its most effective when you use it with binary options and focus on major stocks. These are the assets most heavily impacted by news, so this is the best place for you to start.

First, pick a sector that you are familiar with. When it comes to binaries, there are many tech and energy stocks right now. Some brokers might offer major financial stocks, as well, but these are much more rare. Binaries are very limited when it comes to asset choice, and while this might seem to hinder you at first, this is a good thing for this strategy. It automatically limits your search and makes sure that you are looking at only the companies that will be the most impacted by big news. Also, remember that the stock market is huge, and this helps you so that you will not just be overwhelmed by trying to figure out where to start

Next, scan the economic calendars to see if any of your choice companies have upcoming announcements. Some news will be planned as an event, other items will be a complete surprise to you. In other words, you need to prep as much as you can so that you can find out about the surprises as quickly as possible. Having a streaming news subscription is probably the easiest way to filter through all of the news out there and have as wide of a reach as possible. There is usually a fee associated with this, but it will more than pay for itself when you are ahead of other traders on establishing positions and can reap the benefits that they are meanwhile creating for you with their late entry.
You can Trade the News
How does it work? You get a piece of information, and then using your knowledge of the asset and the group psychology of those people that will be trading it in a manner that can affect price change, you take the appropriate position. It’s particularly useful in the binary world where you can determine the timeframe beforehand without affecting the profit rate. Some pieces of news are fast acting, and stringing together dozens of 5 minute trades in a row work. Some, you need to be a bit more patient with. Whatever you choose, this is something that you can trade just as a day trader would, but without the risk and huge investment stake size.

Binaries also present you with a safety valve. If, after a few trades, you realize that this is simply not working out, you can stop taking positions, lick your wounds, and regroup. In other words, you can exit the position without a huge loss, learn from what went wrong, and do it better the next time. This is a lot harder to do in the traditional stock market because the risk levels are so much higher.

This strategy is extremely effective and profitable, but there are some caveats. One, the market doesn’t always work in the way we think it should. For example, a piece of good news should drive a company’s stock price up. However, this doesn’t always happen. For example, a services company recently announced that they had a quarterly loss, but that was only because they had higher than average contract costs because of all the new business that they’ve acquired. The fact that new business means that profits will go up soon should have driven prices up right away, but they went down for a bit instead. Knowing little nuances of the market like this for your particular sector will help you work out the kinks quickly when you apply this strategy to your own trading. Experience is needed to dictate how you go.
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