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Options Strategies! 3 Reasons to Start News-Trading!

Options Strategies! 3 Reasons to Start News-Trading!
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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.

Contents:

1.What Is the News?
2.How to Trade with This Option Strategy?
3.Another Point!
4.News-Trading Advantages
5.News-Trading Disadvantages
6.Afterword

What Is the News?

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.news-trading-4

How to Trade with This Option Strategy?

  1. Firstly, you need to learn, how a single news affects the market. You can do this either with articles on the Net, or with an economical calendar, clicking on a matching header. You’d better start trading with some knowledge about popular and important types of news and which impact they have on your asset.
  2. After studying all info, you can open an economical calendar and study it then. Be advised: you need only news related to your asset. For example, if you trade with dollar-Swiss frank pair, German or Russian GDP is useless for you.

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.

  1. When you’ve chosen types of news you need, just wait for them and place your bets. You must buy options in a moment, right after the parameter appears, because the rate will change significantly, but abruptly – so, you don’t have much time to make a decision. Here’s my advice: open two tabs in the browser: the first is your economical calendar, the second is a big button “BUY”.

Another Point!

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.

SEOUL, SOUTH KOREA - MARCH 12: A bank employee counts U.S. dollars banknotes at the headquarters of the Korea Exchange Bank March 12, 2003 in Seoul, South Korea. The dollar began stronger against the won amid a bleak economic outlook and the growing concerns over the North Korean nuclear crisis, closing at 1,245 won per dollar, up 15.10 won. (Photo by Chung Sung-Jun/Getty Images)

News-Trading Advantages!

  1. Usually, news-trading gives much more profits than any other ones. With it, you can predict more accurately, where the rate will move and when. This strategy is especially profitable with turbo-options of 15, 30 and 60 seconds, because it often occurs that after the price jumped toward a news, a big drawback takes place and the rate returns to the original position. But, having bought a short-term option, you are likely to gain profits. This strategy exceeds most technicaland even some fundamental strategies in profitability, though, it’s not that difficult.
  2. Using news-trading, you get a fast, almost momentary result. You don’t need to wait for hours or days, having stress that leads to losses. When buying a turbo-option, you won’t be able to doubt a decision – gaining or losing at once, without additional stresses and embarrassment.
  3. As a rule, you can enter the market 50 times a day using news, and if it’s not sufficient for you, along with popular currencies, trade with Third World currencies, precious metals and indices. Though, to gain much from proper trading, 5 signals per day are pretty fine. Remember: you work not with martingale, so you can feel free to raise the bet, if most signals work well.

News-Trading Disadvantages!

  1. For profitable news-trading, not only economical market knowledge is important, but also a fast reaction. Actually, the rate abruptly changes once the news is published, and if you didn’t open an order, you can suffer losses. As a rule, the faster you react, the more you gain. However, not everybody can do this, and some traders can’t buy an option in a moment.news-trading-2
  2. In some cases, you can’t say for sure about further direction of a rate. I mean when traders’ expectations don’t come true, and though a parameter changes in a needed direction, this change is insignificant and can’t cause any movement. You can enter the market but leave it with losses then. Pros are able to predict rate’s behavior, but novices make fatal mistakes.

Afterword

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.

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