By Darrell Martin
In the first article in this series, the availability of worldwide trading sessions as well as some things to look for was discussed. This article will show you how to analyze the history of specific news reports to make them advantageous in your trading. In addition, it will present strategies you could use as you trade binary options during the morning and evening trading sessions.
Analyze
By checking an Economic calendar, such as one from investing.com, you can see the history of a news event. In the following image, you can see for the US Non-farm Payrolls released at 8:30 AM on December 4, 2015, the history of the previous six months is shown.
Look at the date on the economic calendar. Then go to your charts and look back at the corresponding dates when the reports were issued to see how the market responded to the news announcement. Answer the following questions:
- Did the market go up when expectations were missed?
- Did it go down when expectations were exceeded?
- Did it move immediately and keep going in that same direction or does it pull back?
- Did it take time to make the move or was it fast?
- How far does it usually move?
- Was there a retracement back to the high or low that occurred because of the news?
- If there was a pullback, was it a consistent pattern on similar news releases? If it is, then you can enter on the pullback.
You’ll want to know how the report compared to the previous report. Were there any revisions? How did it compare to this time last year? Were any other reports released at the same time? Those reports could be good, bad or neutral news. If both good and bad at the same time, it can have a muted effect on trading.
Yes this is some homework, but if you do it for the course of three months, you will have a trading book for the whole year for news reports because reports are released monthly, quarterly and yearly. You would know what to trade, how the market moves in response to the news and when to place your trade.
In the next article in this series, the different strategies to use when trading news reports will be discussed.