News Calendar Strategy for Binary Options
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News Calendar Explained
Did you know that news can have a huge impact on the markets? Have you ever seen sudden sharp moves on the chart and wondered what the heck is going on? Well, this volatility is due to some sort of economic data release. Luckily you can make use of News Calendars to warn you of such events. These news releases are one of the most important catalysts for short-term movements in any market, particularly in the currency market. The foreign exchange market responds particularly well to US economic news, but news from around the world also plays a big role. There is generally no less than seven pieces of economic data being released on a daily basis. This is because there are at least 8 major currencies with 17 derivatives of them. So there are more than enough opportunities for those who choose to trade the news releases.

What Exactly Are News Calendars

News Calendars are used to warn you about any upcoming news events that might have an effect on the market that you are trading. They show you a little bit of detail regarding the news event and also gives you the actual, forecast and previous figures. Let's take a look at an example of what a News Calendar normally looks like:
news-calendar
 
Figure 1 – News Calendar from ForexFactory.com

How News Calendars Are Calculated

News Calendars will display the type of impact that a news event will have on a specific currency pair. Red means high impact, orange means medium impact and yellow means low impact. News Calendars will also tell you if and when there are any bank holidays. Days like these will have very little to no movement on the correlating currency.

How Can I Apply This To My Trading

Firstly, it is of utmost importance to know which data releases are expected for the week ahead. Secondly, you need to know which of these releases are important. So, now you might be wondering what all the high impact news releases are. So, let’s take a look at what the most important ones are for any country:
  1. Interest rate decisions
  2. Retail Sales
  3. Inflation (consumer or producer price)
  4. Unemployment figures
  5. Industrial production
  6. Business sentiment surveys
  7. Consumer confidence surveys
  8. Trade balance
  9. Manufacturing sector surveys
The relative importance of the above releases may change from one month to the other based on what the market is focusing on. Now that we have all this information, trading news should be easy, right? Wrong! Trading these releases for beginner traders are not recommended at all. Beginners should rather focus on other binary options strategies before they move on to trade the news. Why do I say this? Well, you see trading news is harder than it may sound. The volatility that comes with these data releases can be quite overwhelming. Trying to predict the movements of a currency based on major news releases are nearly impossible. You might have the initial direction right, but the market can easily come back the other way. This is known as stop runs in the forex market.

Metatrader indicator for News Calendars

As always, MetaBinaryOptions is offering you a free Metatrader indicator for helping you apply this strategy.

Click here to download the indicator 100% free

This indicator will automatically plot News Events on your chart so that you don't have to go looking if there are any news being released. You will never be caught off guard again when using this. Make sure to "Allow DLL imports" in Tools/Options/Expert Advisors before using the indicator. The indicator fetches news in real time from ForexFactory.com and displays them on the chart. It is also possible to run backtests in the Strategy Tester based on historical news data. Along with the indicator file you will find a MBOnews folder containing all historical news from January 1st, 2010 to August 1st, 2015. To backtest, place the MBOnews folder inside your Data Folder/tester/files. Take a look at this article for more info: How to backtest historical news data in Metatrader Strategy Tester?

forex-factiry-news-MT4

Figure 2 – News Calendar indicator

So what if you really still want to trade these market releases? Well, I would suggest that you make use of some sort of breakout strategy. Another way that you might want to trade this strategy is by making use of ‘One Touch options’ or ‘Boundary options’. These options might give you more of an advantage than the normal High/Low options would. Play around to see which strategy works the best for you.

News Calendar Summary

If you want to trade news successfully, you should not be thinking what the markets are going to do because you have absolutely no control over that. What you should be thinking about is what you are going to do when the market gets there. It is good to know what makes the market move and that is news of course. The news is what keeps the market going. Your success, like in any other trading strategy, will depend on your preparation that you put in. You are going to have to trade many different reports before you will know what news releases to focus on and which ones should be avoided.
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