In order to have a successful Binary Options trading strategy it is necessary to have a plan of attack. It is always important to remember that with binary options you do not own the asset; you are merely deciding on which direction the asset will move. UP or DOWN?
If you are correct with your assumption of the direction the underlying asset moves, then your investment is a success because the asset lands ‘In the Money.’
On the other hand, if you are unsuccessful in your calculation and the asset moves in the direction opposite of what you predict, then you have a loss or are ‘Out of the Money.’
A popular and easy to use system or strategy that I’ve found successful is the 3-3-3 trading strategy for Binary Options.
Day Trader Economic Calendar
Using the Day Trader Economic Calendar we find three (3) important pieces of information:
1. Forecasted results;
2. Latest release results;
3. Actual results – released immediately.
Other important items of interest include:
1. The name of the event that is happening;
2. The time of the release;
3. The currencies likely to be affected by the data’s results.
A majority of economic calendars also post events by the order of their significance and effects they’ll have on the markets. Such information may be:
1. Releases that are extremely important;
2. Releases that are important, but are not considered to be market movers;
3. Releases that contain little market value, but give a wide view of the economy and other reports.
There’s almost too much information, if that is possible. So, what do you do? Who do you turn to for the most meaningful information? Go to Day Trader Economic Calendar.
To help you forecast, you’ll need to:
1. Evaluate how the market responds if the data is above the forecast;
2. Evaluate how the market responds if the data is below the forecast;
3. Evaluate how the market responds if the data is even with the forecast.
Forecasting is not about being good or bad. Forecasting comes from what economists and analysts indicate the reports may show.
If the job market is doing poorly and the forecast for the report posts a loss 100,000 jobs, that is bad statistic for the economy. However, if the actual report’s data shows there was a loss of 80,000 jobs that shows it is above the forecast. This is considered good for the currency since investors have already prepared for the results with the previously forecasted data as the markets have been corrected.
Now that you have these reports, you have to select which underlying asset you want to trade.
What asset to trade?
You have to make three (3) decisions:
1. What currencies will be affected by the report? (This tends to be the simplest choice)
2. Which commodities will be affected by the report?
• If there is a drop in the Gross Domestic Production (GDP) of a nation such as the United States, it will usually cause a drop in the price of crude oil. With lower growth in GDP there tends to be a lowered demand in oil, which then causes the price of oil to stay low or drop.
• Which indices and stocks will be affected by the report?
3. If the Federal Reserve lowers interest rates, then perhaps the stock prices of companies that build homes or banks who lend on construction or mortgages will rise, since the public will be able to borrow money at a cheaper price.
CALL or PUT?
Now that you’ve selected the underlying asset (currency pair, commodity, indices/stocks) you have another choice of three (3) options:
1. Buy an asset or ‘CALL’ if you think the asset will rise;
2. Sell an asset or ‘PUT’ if you think the asset will fall;
3. Do nothing if you’re not sure which direction the asset will move.
After you determine the direction or non-direction of the asset, there are three (3) possible outcomes.
1.Land ‘In the Money”
Trades that land ‘In the Money’ are considered a successful trade, and the result is that you are paid for your investment;
2. Land ‘Out of the Money’
Trades that land ‘Out of the Money’ are considered an unsuccessful trade, and the result is a full loss of the investment amount.
3. Land ‘At the Money’
Trades that land ‘At the Money’ are very rare and are considered ‘a push’ or ‘even’. The asset falls exactly on the same price as the original strike price, resulting in a return of the investment amount. There are no losses, but also no profits made when a trade lands ‘At the Money.’
Armed with your Day Trader Economic Calendar you can decide when and how to use this information to your advantage. We all know that knowledge is power. Now you have the power!
Three way in which the markets may react:
1. There will be an overreaction by the markets compared to the original forecast by either going well above or well below the report;
2. After the reports are released, the markets will re-compensate and overreact as they try to correct themselves;
3. Within a few minutes the markets will correct themselves and establish a new trading level.
By following the general Rule of Threes (3s), you may assess the situation more confidently as you view an economic calendar. You’ll be able to:
1. Make your initial trades immediately upon the release of the data;
2. Enter in your second round of trades while the markets begin to show their results; and
3. Conduct a third set of trades as assets make slight adjustments to meet the market line.
Using the Rule of Three strategy over and over again in various scenarios, Trading Binary Options can be profitable.
Follow the links for more information on how to use the free Day Trade Economic Calendar and the 4 main trading styles for Binary Options.