In previous materials I mentioned it’s not reasonable to use fundamental analysis as an option strategy, because, usually, only long-term rate movement if forecasted this way, while options can be bought only for short terms. Though, any rule has exceptions, and here we’ll talk about a fundamental strategy letting earn with options. I admit that I love this strategy most and thus, always recommend using it.
News is one of essential tools for any fundamentalist-trader. As a rule, they use them to predict the rate of currency, stock or precious metal. And the news are quite different. They are updates of official GDP figures, the consumer price index, interest rate of the Central Bank, the volume of sales, etc.Each of these parameters has a higher impact on the asset, but this effect is different.So, even with the slight increase in interest rates, the exchange rate may react sharply, covering several tens or even hundreds of pips in seconds. But consumer price indices do not have a significant impact, and to price changes, there should be more significant and sudden change.
There are lots of news-trading rules, and you can study themeither in theory, or while trading (I used the latter). Trading with this strategy is not very simple, but not so difficult. You should just realize several main parameters’ value and then start trading, analyzing other parameters at the same time.
If you think you’ll have to watch economical news of major world nations, you’re wrong. Traders worked this way in previous times, but nowadays Internet lets you the multitude of economical calendars, where not very news are publishes but parameters mentioned there, expected values, traders’ feelings, importance of news, etc. Using such a calendar, you don’t even need study much about a single news, but just click at a parameter (GDP, for example) and you’ll see info about what it is and how it affects the market. Though, most traders don’t do this, suffering losses. Don’t think that if one parameter rises, so does the price. It occurs with many characteristics, but, for example, the higher is unemployment rate, the lower is the currency rate.
One should forget that when trading at currency market, they deal with two tools – it must be concerned in the analysis. For instance, the euro-dollar chart. You have to choose US and EU news in the economical calendar. Furthermore, euro is the first in this pair, so if German GDP rises, so will do the rate, but if US GDP rises, the rate will fall.
Most make a mistake, trading with euro-charts. Remember: you don’t need the whole EU, but only nations using this currency. For example, UK is the member of EU, but it has its own currency, so, its economy doesn’t affect EUR rate.
Pay attention that before the news is published in an economical calendar, the expected value appears (it’s calculated according to many traders’ opinions). In fact, this is the parameter forecasted by the majority of experts, and some traders, using medium-term options, open an order before the news, affecting the price. Let’s look:
US GDP for the previous period totaled 40 000 USD per capita. The rise to 43 000 USD was expected, but by the time the news has been published, it rose only to 41 000 USD. It’s unclear in this case, and difficult to define how the price will behave. Dollar ca neither rise or fall or stay still, because most traders’ expectations haven’t turned true. In such cases, one is not recommended to enter the market, especially a novice.
I’d love to add that news-trading is the only fundamental option strategy that can be used for short-term trading. All other algorithms of fundamental analysis are able to let you gain only in long terms. And if you are interested in turbo-options, try this very system.
for binary options
|Moving Averages:||Buy (11) Sell (1)|
|Indicators:||Buy (8) Sell (1)|