How to Trade High Impact Events with 60s Options

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Video Transcript

Welcome to the first lesson of the News Trading and 60-second Option Course. In this lesson you are going to learn what are high-impact events and why we use the 60-second option to trade them.

So, what are high-impact events? High-impact events are announcements that have a strong repercussion in the market. Usually, these events are highly anticipated by traders and when the data is dumped, traders react accordingly, moving prices extremely fast.

These times of high volatility are not recommended for new traders. Some examples of these events are the non fund payrolls, which are the employment numbers in the United States minus agriculture, the Central Bank’s decision to cut or maintain interest rates, consumer price index, monetary policy minutes, Central Bank’s chair speeches, etc. Binary options offer a great opportunity to trade during these events.

Now, here is an example of volatility during important news. This is the Aussie/US dollar 5 minute chart. As you can see, from low to top we have a 78 bid range in two days of trading. We went all the way up here, then dropped a little bit, then went all the way up here; this is a 78 bid range in two days.

Right here, the RBA decided to cut the interest rate, which is bad for the Aussie, making the price of the Aussie/US dollar dip 90 pips in 15 minutes, from this high to this low. This is what you can expect when there are events or news to be had during the trading day. If you don’t know what to expect or how to interpret this news, you won’t be able to take the correct side of the trade.

Let’s go to the charts because today we had a rate decision, an interest rate decision in the United States, and we can actually see what happened in the markets.

Okay, this is Investing.com and this what an economic calendar looks like. Here we have a currency that is impacted by the news, the time of the news, the importance of each piece of news, and, of course, what the news is, the previous numbers, the forecast, and the actual number that is being released.

Here you have levels from one bull to three bulls. One bull signifies that there is low volatility expected because the news has no impact on the market. Two bulls means that we have a moderate volatility expected. Three bulls means that high volatility is expected so we need to be careful with the time this data is being dumped.

We have the filters right here. We can filter out by country, and of course we can filter it out by importance. We are going to filter out just the medium and high impact events because we are only trying to trade this news with this strategy.

Today we are going to focus on the interest rate decision that just happened 22 minutes ago. The previous number was 0.25%, the forecast was an unchanged interest rate, and the actual decision was to remain at 0.25%. So, the Fed decided not to change the interest rate during this meeting. Now, let’s go to the charts to see what happened.

This is the US dollar/Canadian dollar 30-minute chart. If we go to the one- hour chart we can see that the news was released right here and prices have rallied 100 pips. Since the decision was not to change the interest rate or to cut the interest rate, these affected positively on the US dollar. When an event has a positive effect on the US dollar, this brings the price of the US dollar against any currency up. It also brings the price of any currency against the dollar down.

This is the case of the euro against the dollar. Since the news that impacted the US dollar was good news, it brought the price of the euro against the dollar down and, of course, the price of the New Zealand dollar against the US dollar down.

This is what you need to remember, guys. First of all, you need to monitor the important news that is being released during the trading day. If the news impacts positively to any currency, it brings the price of this currency against another currency up, and the price of any currency against this currency down. This is the case of the US dollar today. Since we have the GDP release on New Zealand in a couple of hours, we are going to try to trade it live.

Basically, this is what you need to know. First of all, you go to the economic calendar, you filter out the non-important events. You wait to see what currencies are impacted. You bring out your MT4 platform and you prepare for the release of the data.

In the next few lessons you will learn the exact strategies to trade these events and how to profit from these times of high-volatility.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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