Currencies are very popular assets among binary traders. There are many important reasons for this. One of them is that you can invest in currency based binary options throughout the day, with some limitations.
Another reason is that currencies respond to events that do not have the same effect on other assets. This opens up certain trading opportunities that smart traders will know how to take advantage of.
How to find the best time to trade currencies
Timing is crucial in all sorts of trading. This is especially true for binary trading, which by definition is a very short-term investment method. When it comes to currencies, you can earn big money by getting your timing right. In this article we look closer at the best time to trade currencies.
Currencies are unique
You can invest in binary options that are based on all sorts of assets. One of the most popular types of assets for binary options is currency. Such binary options ask you to predict the relationship in price between two different currencies, for example the euro and the US dollar, or the British pound and the Australian dollar, and so on.
When it comes to timing, currencies differ from other assets because they are traded all over the world, around the clock. This means that time zones do not put the same restrictions on currency trading as on other types of trading that are controlled by opening times of the world’s largest stock markets and commodities exchanges.
Seeing as events in Japan, Johannesburg, and Sydney can have major impacts on the value of the US dollar, this is an asset that is constantly changing its price. This means that you can invest in a binary option based on a currency pair pretty much 24/7.
However, having said that, prices will move more often and more strongly when the major markets are open. Clearly when trading is taking place in London and New York, there will be more and stronger movement in the relative values of the US dollar and the British pound. Seeing as price movements are what binary options are all about, this means that currency options also have an optimal time frame during the day, that being whenever the most important markets for any given currency are active.
Spotting trading opportunities for currencies
Because of the unique qualities of currencies, they offer certain trading opportunities that most other assets do not. This in particular pertains to the fact that other factors determine the price of a currency than assets such as stocks and commodities.
The price of a currency can be greatly boosted or severely reduced by news events. Government policy can have huge impacts on a currency. The same is true for major economic indices such as unemployment figures, a country’s trade balance, interest rates, and so on.
This means that there are certain other events you need to keep an eye on in order to time your trading in currency based binary options to perfection. A classic currency opportunity will arise when you know that a major news announcement is expected in regards to a country’s finances. For example, if the US government’s official unemployment figures are due to be announced, this will impact greatly on the value of the dollar. An election in Germany will impact on the Euro and so on.
Now, seeing as you are not a clairvoyant you cannot know, for example, what the US unemployment figures will show, or who will win the German elections. You don’t know either with any certainty how the market will react to these events. What you do know, however, is that there will be a reaction. You know that the value of the currencies involved will be affected, which means big market movements, which means money to be made in binary options.
The smart strategic move when it comes to the timing of currency trading, then, is to await major news events, and invest in an option that doesn’t require you to predict the direction the market will move in. One such option is a boundary option.