I can vouch for the fact that novice binary options traders have a lot of questions when they come across options trading. We know that binary options are derivatives, which means that their value is derived from the value (movement) of the corresponding asset. But what influences the change in the price of currencies? They are traded in pairs, but the pair is never perfectly balanced. Just imagine a currency pair on Forex as two athletes in the ring, with the same physical abilities. Now imagine the EUR/USD pair: if the euro is stronger than the dollar, the pair will rise, if the dollar is stronger, the pair will fall. The balance of power between the two is constantly changing, and this entails price fluctuations, trend, recovery, and reverse movements. The word “recovery” is a financial term that means a temporary reverse movement in the direction of the price of a commodity or currency that contradicts the underlying trend.
A recovery does not mean a change in the main trend. A very large number of currencies can be traded in the Forex market, the currencies that are most traded are called major. The main characteristic of the main pair is that it includes the US dollar. And these pairs make up about 85% of the volume of the Forex market. The remaining 15% consists of other currencies (those pairs that do not have a dollar) and exotic currency pairs. The main pairs are EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/ CHF, USD/CAD and NZD/USD. These pairs are traded so often that traders even gave them nicknames, the most interesting for me seems to be the nickname “cable”, for the GBP/USD currency pair. This couple got their nickname due to the fact that once a communication cable was actually laid across the Atlantic Ocean, thanks to which the rate for GBP/USD was synchronized between New York and London.
» Trading hours of currency exchanges
It’s good that we now have advanced wireless technology, isn’t it? Most Forex pairs can be traded 5 days a week, 24 hours a day, and as a rule, the broker offers binary options trading on currency pairs in accordance with this schedule. But still, it’s a good idea to check your broker’s “Asset List” to see if this is the case. Depending on the broker, trading hours may vary.
» Live charts of binary options
Trading Currency Pairs: Influences
The charts are in constant turmoil, with each currency trying to get to the top. What drives them and how can we benefit from it? Well, the currency of a certain country is very much influenced by the general state of the economy, political and financial news, prices in central banks, speeches of bank managers, natural disasters, geopolitical events and sometimes even rumors are important. Based on, but not limited to, a currency can strengthen or weaken its position, but we must also closely monitor influencing factors such as the other currency in the pair. For example, if there was good news about the euro, but the news about the US economy was worse than expected, then we should expect that the EUR/USD pair will go up, as the euro will be stronger than the dollar. And at the end of the day, we teach what matters to us binary options traders. If we expect that the asset (in the example with the EUR/USD currency pair) will rise, then it’s time to buy Call on EUR/USD.
» Binary options strategies for currency pairs
A binary option is a derivative and its value will rise, which will make our Call profitable, assuming that the currency pair did what we predicted and our analysis was correct. The news and all the events that we talked about in the last paragraph make up the bulk of the movement of the price of a currency, but there is another type of analysis that plays a significant role in the financial markets: technical analysis. This type of analysis is performed by identifying trends, support and resistance levels, using various technical indicators or tools. A trend is actually a long movement in any direction, a good profit can be obtained from trading in the direction of the main trend. Support and resistance levels are potential turning points. Resistance can be identified above the flow price, and this is the area where price has returned at several points to the past. Support is always lower than the in-line price, the same principles are used. Support and resistance levels and trends are the main ways to use technical analysis in trading currency pairs. You can see more detailed explanations in other articles.
My Tips for Trading Currencies
One of the most important financial events is the announcement of the official interest rate by the European Central Bank (ECB), followed by the release of a press release where Marco Draghi, President of the ECB, gives a special speech and answers questions from journalists. As a rule, the fluctuations during a press conference are enormous, and Draghi’s words are immediately analyzed (and sometimes misunderstood) by traders. This can create many cases of capital reduction, wrong movements, especially with the EUR/USD pair, but it also has an impact on other pairs. One second you have the impression that the price is rising, the next second it seems that it is moving in the opposite direction, falling sharply down.
» Economic Calendar Binary Options
I once bargained, very strongly, when I received the wrong signals about the situation on the market during the press conference of the ERU, and decided (I also recommend you) to stop trading when Draghi speaks at a press conference. For all currencies, such specific news is of great importance. As a rule, the announcements of the Central Bank have a huge impact on the respective currencies and are one of the most significant events for the US dollar and the release of non-farm employment (NFP) indicators. When all these events occur, the best solution is to let the market cool down, and start trading only after that. Also, do not forget to check the Forex calendar to keep abreast of the main events regarding the pair you are trading. Information on high-profile currencies and trading tips
Overview of EUR/USD
Exchange: The EUR/USD currency pair is traded decentrally, globally and around the clock in the foreign exchange market known as Forex. Working hours: Around the clock, 5 days a week. Check the exact time with your broker. Offers of binary options brokers for the EUR/USD currency pair: Almost all binary options brokers offer binary options on EUR/USD My advice on the EUR/USD currency pair in 50 words: Prices fluctuate a lot during the appearance of new announcements, so you should refrain from trading these currencies for at least 30 minutes after the news release. At this time, very often there are false movements and a decrease in capital, which makes the process of technical analysis very difficult, and its results are unreliable. Another tip: if Mario Draghi (the real president of the European Central Bank) or Ben Bernanke (the real chairman of the US Federal Reserve) give a speech, let them finish, and only then start trading. The reason is the same as mentioned earlier.
USD/CAD Overview
Exchanges: The USD/CAD currency pair is traded decentrally, globally and around the clock in the foreign exchange market known as Forex. Working hours: Around the clock, 5 days a week. Check the exact time with your broker. Offers of binary options brokers on the EUR/USD currency pair: Almost all brokers offer binary options on the USD/CAD currency pair My advice on the USD/CAD currency pair in 50 words: Canada is one of the largest suppliers of oil to the United States. Due to the large volumes of import-export, the economic systems of both countries are closely interconnected, and this makes the exchange rate of their currencies quite stable, with low variation within the day. The exchange rate may be affected by the price of oil.
USD/JPY Overview
Exchange: The USD/JPY currency pair is traded decentrally, globally and around the clock in the foreign exchange market known as Forex. Working hours: Around the clock, 5 days a week. Check the exact time with your broker. Offers of binary options brokers on the USD/JPY currency pair: Almost all brokers offer binary options on the USD/JPY currency pair My advice on the USD/JPY currency pair in 50 words: Due to the ratio between the US dollar and the Japanese yen, this pair is less volatile under normal conditions. It is known that the Bank of Japan intervenes in the market in order to stabilize or make changes in the exchange rate, and this can lead to unexpected jumps.
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