Perhaps you’ve already come across the concept of trading with the news. One of the main factors which can influence the price of an asset is the release of news which will have a bearing on its supply and demand.

Today we’ll be exploring a three-step trading strategy which involves trading the news but first let’s understand why and how the news effects the markets.

World news like the outbreak of war in the Middle East or the Bank of England announcing a planned interest rate hike can have a big impact on market prices – the mere expectation that the interest rate is going to rise is enough to affect the exchange rate of the British pound. This is the power of news releases in the financial world. So how do we go about trading the markets based on news?

While we don’t know what tomorrow’s news is going to be we can still plan our trades around the various economic announcements that are scheduled to be made by the central banks, major corporations and leading industry experts. Most of the information concerning these scheduled news announcements can be found on most economic calendars like the anyoption calendar which you can find at anyoption or financial news sites.

Now with binary options you only have to be concerned with the direction of the market movement and not by how much the market will move. The trick here is to get into the market when the price movement is already underway. Here’s how you can use this strategy in three steps.

Step One: Identifying the trade opportunity

Let’s assume you’re interested in trading the euro/us dollar for X pair. Since the interest rate is the primary factor that affects the exchange rate you need to check the economic calendar and see when the European central bank or US Federal Reserve is going to make an announcement about anything that might affect the interest rate. Then wait for the announcement to be made and see if there is a significant difference between the expected rate and the actual rate.