Lesson 5 - Binary options trading time TRADE JOURNAL Before you begin to trade, be sure to have a trade journal where you record all your binary options trades. Doesn't matter if you trade on paper or real account. Discipline and precision plays a very important role in trading, that’s why a trade journal will help you to be more organized. A huge advantage of having a journal is that you can analyze your results and draw conclusions. What assets you can predict more accurately and on what timeframes. You will gather a lot of useful information that will be useful for your future trading. At the same time you will know what was your trading forecast based on, and how confident you were executing the trade. What to write in the journal: The asset you are trading Date and time of option expiry The trade size The time of buying an option The level of buying an option The level of option expiry Your forecast (Call or Put) The result (Profit/Loss amout) What your forecast was based on open in browser PRO version
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That's basically all the points that must be noted. You can customise this list as you prefer. Most importantly do not be lazy.
NOTEBOOK FOR STRATEGIES In order to trade successfully you must develop your strategy. Below there are some strategies that you have to test and adjust for yourself. In order not to get lost in a variety, get yourself a notebook where you will write down strategies, indicators, and shapes you have used for analysis: for example Pinocchio - looks like reversal pattern. After the formation, buying an option in the opposite direction of the long shadow... and so on. Whenever you start trading, in front of your eyes must be clear rules like: if the price approaches the upper Bollinger Band, then I buy a put option with an expiry time at the close of the next candle. Such approach will help you avoid additional psychological stress. You will be more confident and accurate, which is very important for successful trading. CHOOSING THE EXPIRY TIME All beginners ask the same question, what is the best timeframe for trading, in other words how to choose the expiry time. The answer is quite simple: higher timeframe means higher accuracy of the forecast and lower probability for the market noise to mislead you. open in browser PRO version
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Use 5, 15 or 60 minute timeframe for chart analysis if you decided to trade 1 hour or 30 minutes options. In any case, it’s your decision. Because depending on experience and psychology different traders will trade differently on different timeframes. Choose your approach, don't rush and test your strategies. QUANTITY OF STRATEGIES NOT ALWAYS MEANS QUALITY Let’s look at another misconception. To be more specific, we will look at the Holy Grail or 100% winning strategy. Forget about this kind of strategies, they do not exist. There are strategies that give advantage over the market, but this also depends on you. There is a fact: one person can have excellent results, while another constant losses. That’s why don't be tempted to use all strategies and indicators available, don't rush and watch your temper. No one had good results when rushing; this is the road to nowhere. It does not mean that testing should be abandoned and its not necessary to learn something new. At the start, beginners should only use simple strategies, which will be described below. Pick a strategy, test and tweak it for the couple of weeks. Check the results, because few loosing trades don't mean anything. You should understand this strategy and trade it without any doubts and psychological stress. Even a dozen of test trades will not show you an objective picture and will not give you reliable statistics. So the rules are: chose one strategy and test it, don't forget to write down all your results where you'll have statistics of successful trades. WHAT IS THE BEST TIME FOR TRADING You can trade binary options from Monday to Friday. On weekends mostly one touch options are available. One of the most difficult days to trade is Monday and Friday. That’s why you should not start trading Monday morning. Wait for the afternoon, when market will settle. Tuesday market usually reverses or bouncing of strong support or resistance levels. On Wednesday, after the bounce a strong trend might be dominating. Thursdays usually trend continues for a short time and also might find a strong support or resistance levels. Follow the market on Friday, there might be open in browser PRO version
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either strong rally, or consolidation, and if you see that it’s not your day, just relax.Let’s talk about Forex currency pairs; because beginners prefer trading this asset class and some achieve very good results. This information is important for those that prefer to trade intraday. If you choose options with the expiry time of 4 hours, 1 day or 1 week, then you can skip this information.
The U.S. Session is 13:00 to 22:00 GMT - Even with the minimal overlap in hours, this is a great period to implement your binary options strategies. You can expect good volatility in any currency pair. This is because the US Dollar is the most traded currency in the world, so traders will always trade during the US Session. The Australian Session is 21:00 to 07:00 GMT - The New Zealand Session actually kicks off a Forex trading "day". But the Australian Session is one of the four primary trading times for most traders, making these hours a good time to trade. Of course, the Aussie is a good currency to look at during the hours that Sydney is open. The Asian Session is 24:00 to 09:00 GMT - During this period, you can successfully trade, especially if you trade the Yen. USD/JPY is generally a good choice in this time frame. This period is not as volatile as the US session or the European session, but it's possible to trade it and achieve good results. The European Session is 08:00 to 17:00 GMT - This is one of the best periods to trade. Since most of the dealing desks of large banks are located in London, most major Forex transactions are completed during this time. During these hours you can implement a successful binary options trading method on any currency pair. The European and U.S sessions are the most important ones in Currency Market. so you can trade between 08:00 and 20:00 GMT and get good intraday swings almost every single day. See picture below.
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Between 13:00 and 17:00 GMT we have the U.S. and the European sessions open at the same time. This is the best time of the day to trade. Volatility and volume is good in all currency pairs. Some of the most important economic releases appear during this period, and this brings good opportunities for Binary Options traders too! Trading Sessions Desktop GadgetThere is a convenient desktop gadget – time of the trading sessions. If you trade with Finpari, you can request it absolutely free from the support team of our broker. You will always know what the current trading session is. It looks like the one on the right:
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ECONOMIC CALENDAR AND NEWS TRADING It is difficult to overstate the importance of the news impact on the assets price movement. Therefore it is necessary to understand the information given in the economic calendar. Some people use the news to design personal trading strategy. We'll talk about this a bit later. But there are traders who prefer to be patient and wait for the perfect time. For those who only started trading binary options, it’s probably better to sit out. First look at the screenshots below:
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As you can see, during the news release, the price of an asset makes large swings. Price extremes can be used as a local minimum or a maximum to buy an option. This is the list of news that has a big impact on the market:
Changes in inventories of raw materials Consumer Price Index Interest Rate Decision
Retail Sales Index Sales of new homes Wage Data Retail Sales
Unemployment Data GDP Data
Pay attention to important news. They are marked in the economic calendar with three bulls. The news of a medium importance are marked with two bulls. And the low importance news are marked with one bull. open in browser PRO version
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Higher the importance of the news, higher impact it will have on the currencies.
When trading currency pairs, pay attention to the news that come out on both currencies. Within couple of minutes after the news, you can see the result, or in other words how your forecast is different from the actual forecast. These figures are marked by three colors: green - the result is better than expected, red worse than expected, black - as expected.
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For example: there is a news release at 14:00 on USD currency that is marked with three bulls. Around 14:01 information will be automatically updated (if not, refresh page by pressing F5). And in the “Actual” graph you will see a green number, which means that the news are positive for the USD. This means that the USD got stronger and will start to grow. Obviously this will results in the EURUSD exchange rate to go down. It will also work for other currency pairs. If the news for the USD are negative, then EURUSD will rise. I think the idea is pretty much clear. I won’t go into details here, to leave you the opportunity to follow some currency pairs and draw your own conclusions. Considering such example, after the positive news release on the USD, the EUR/USD pair is expected to fall. Therefore you can get ready to buy a PUT option. Wait until the market retraces back, and buy an option. In the next lesson we will look into few trading strategies and will try to find an optimal one for you.
Home work: 1. Start your own trade journal and a notebook for strategies 2. Find the most convenient time for trading and stick to it. 3. If you think that your trading strategy can work on the news, confirm that by making few test trades at the time of important news release.
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Want to know more? Subscribe to my YouTube channel, where I publish useful video examples, how to trade binary options.
Sincerely, Abe Cofnas Professional trader
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