You probably know by now that following the news is an important part of your trading. But what you might not know is exactly how time sensitive the news can be. This is especially true when the Federal Reserve makes a decision, or even hints at the fact that they are in the process of making a decision. For example, the mere fact that the Fed is currently trying to decide about what to do with stimulus payouts has recently caused stock futures to jump up dramatically in price. It makes sense if you think about it: more money in the economy helps companies because more money is pumped back into them, both through consumer spending and more stock investments. And when futures begin to attract more attention, oftentimes real time prices are not too far behind.
This is where the common investor can take advantage. Most people do not utilize stock futures, but paying attention to them is extremely important because it is a reflection of long term sentiment. Sentimental trading certainly isn’t a guaranteed metric, but it is very useful when trying to find new trading opportunities. For binary options especially, this can be a good thing to pay attention to if you are looking at making a short term profit.
First, remember that stock futures are not the same as current stock prices. Simply taking out a few call positions when an announcement like this hits might seem like a great idea, and it could be in some cases, but it isn’t necessarily. You need to act fast, but you also need to act fast in a smart way. Just because futures prices have started going up doesn’t mean that current prices will go up at the exact same time.
This might confuse some people, so I will explain it in a different way. The news is time sensitive, yes, but not always in a way that reflects immediate change where you think it will be happening. If the binary market were to directly reflect futures in the stock market, then yes, the change here would be immediate. But they don’t. However, in order to make money here, you need to follow the thread of connection. In this instance, the Fed announcement affected stock futures. Stock futures eventually will have an impact upon stock prices if things continue to go in the same direction, and this is precisely when binary traders need to act.
Of course, this is not quite as easy to predict. How do you know when this will happen? Look at the Fed announcement itself. Who exactly will it impact? The plan is designed to create jobs first and foremost. This will give the average person more cash in their pockets, but it will impact green technology, energy, and infrastructure centric corporations the most. This means that the companies that focus on these things will immediately get a boost if the Fed follows through on this. Big companies like GE and Exxon will see some of this cash to help “modernize” their U.S. based services. You might also see a lot of new startups benefit, too.
There will be long term changes, too. One objective is to make the U.S. more competitive in the international marketplace, and this means that the U.S. dollar will likely see a boost if this is successful. That’s many months down the road, though. Just something to be aware of.
The Fed announcements carry a lot of weight, but there is sometimes a delay in how they actually affect your trading. When they do make an impact, you need to act fast. But before that happens, you need to be patient, and that can be one of the toughest parts of being a successful short term binary options trader.