Trading Binary Options in Volatile Environments
One of the things this website does is try to help you minimize risk as you go forward with your binary options trades, but sometimes when you minimize risk, you can also minimize profit. Every once in a while it is a good idea to take some chances and see if you can increase your profits, especially if you are having a particular good week or month; you can afford to take a few more risks.
We have talked in the past about minimizing risk by avoiding trading in volatile markets. Well today we are going to take a step backward and give you some tips how to do exactly that. It’s not for the faint of heart, but as we said it can lead to some profitable binary options trades if you predict the right price movement. We have discussed trading before in some volatile markets such as when the USA puts out its Non-Farm Payroll Report (NFP). The market tends to get very volatile when things such as, the NFP, interest rate decisions and other economic and political events are happening.
The markets are said to be volatile because in addition to the normal algorithmic trading that takes place you now have to consider the sometimes zealous market psychology at these times too.
If you are going to trade volatile markets then make sure you do so with a well thought out plan. You can use certain information to your advantage, such as knowing that the 24 hours prior to the NFP release there is very little trading taking place; you can trade on smaller time frames, such as 5 minutes, and do some successful trading based on this. By using an Oscillator, such as the RSI, it will help you to identify oversold areas to buy call options and undersold areas to place put options.
Once the data like the NFP has been released and the market gets volatile then you would start trading on bigger time frames with bigger expiration dates to catch the corrections as the market transitions back to normal trading.
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References and Further Reading:
1. Heuristic learning in intraday trading under uncertainty (SD Bekiros – 2015)
2. The Online Trading Cookbook (A Patel – 2012)
3. Comprehensive analysis of market conditions in the foreign exchange market (AH Sato, T Hayashi, JA Hołyst – 2012)
4. An analysis of Indian financial derivatives market and its position in global financial derivatives market (S Bhagwat, R Omre, D Chand – 2012)
5. TRADE PREDICTION ON CURRENCY FUTURES (P Natarajan, E Nirupama – 2009)
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