By Darrell Martin
As a trader, you know how the market can be moved by news events. When the FOMC speaks about happenings with the Fed Funds, traders’ ears perk up to find out which way the market is going to move. These movements can have an impact on your trading in different markets.
Did you know you could actually trade the news release of the economic numbers using binary options? Nadex offers binary contracts on Fed Funds Rates, Jobless Claims and Nonfarm Payrolls. They work the same as other binary options offered on Forex or stock indices. You buy the binary of a particular strike level if you think the news release number will be higher than the strike. Settlement is based on the actual number released from the FOMC, Department of Labor or the Bureau of Labor.
The Federal Funds Rate is the interest rate institutions use when lending amongst themselves. The actual rate is determined in the open market, but the FOMC sets a target Fed Funds Rate as a guide. The actual rate can be further influenced by the Fed by buying and selling government securities in the financial market.
Published by the US Department of Labor, the Jobless Claims tallies weekly unemployment benefits claims. If there is an increase in claims, this typically indicates a weakening labor market. If there is a decrease in claims, this usually indicates there is a strengthening in the labor market.
In the US and abroad, one of the most anticipated items on the trading calendar is the Nonfarm Payrolls. Published by the US Bureau of Labor Statistics, this report tells of the monthly change in the total number of paid US employees, excluding the following categories:
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Farm employees
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General government employees
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Private household employees
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Employees of NPOs assisting individuals
It is estimated that workers on the Nonfarm Payrolls account for roughly 80 percent of the GDP in the US.
Generally, a strong labor market has a positive impact on the overall economy. Household spending power is increased when there is an increase in the number of jobs. An increase in the number of jobs also implies an increase of consumption and economic growth.
Having a knowledge of the possibility of trading new events on Nadex gives you more opportunities for trading binary options. Try them out on your demo account until you are proficient and ready to risk real money.