News trading strategy is related to a simple classification of strategies. To use this particular concept, traders shouldn’t have certain knowledge or skills and that is the reason why it is so popular among beginners. The only thing a trader should do according to this strategy is to predict either positive or negative statistics of this or that piece of news which is partially possible thanks to fundamental factors.
Fundamental analysis does require certain skills and most probably those traders who have experience of working on Forex have tried to work with binary options trading on the news. Its main distinctive feature on the foreign exchange market is an opportunity to open two reverse indents with “stop-losses” and “take-profit”. But before describing this strategy’s pros and cons, let’s look at its core and know how to trade news with the help of binary options.
Let’s consider such situation as an example: a trader decided to trade according to the German index prices. He/she knows that the news is published at 10 am and has an average importance. As a basic asset a trader selects EUR/USD currency pair. At the moment of news release, a trader can sell an option (PUT) and if the price really works out the news, then a trader can earn money. Whereas if he/she buys an option (Call), then it would be a failure as nobody knows if the news is positive or negative.
Basically, this is the core of the News trading strategy. And now it is high time to determine whether it is suitable for binary options or not. In fact, when trading news, traders don’t make any analysis as it is very difficult to calculate the index without having all displays. Apart from that, very few traders can make the right calculations. That’s why it turns out that this strategy is like a game where traders should guess the direction of the price after the news is released. This is the first con of this strategy. The second one is that even if traders guess the right direction, nobody guarantees that the market will react to it. Besides, don’t forget to take into account that the market can react contrary of what traders expect.
Nevertheless, news trading strategies remain to be popular worldwide because the majority of Forex strategies turned out to be on the binary options market.
At the same time, it is a pretty good strategy for novice where they guess the direction of the basic asset after the news is released. All in all, it is already a matter of choice and everyone should decide for himself whether to use this strategy or not considering all its advantages and disadvantages.