The Most Expensive Mistake Binary Option Traders Make
Every day, binary option traders are bombarded by geopolitical and economic news, such as government economic data, that typically creates a lot of volatility in the FOREX markets.
Such price volatility can be positive because it creates the necessary momentum for substantial FOREX price movements, which increases the number of live binary trade signals that Binary Signal App sends to your Android.
Also, the more price momentum in one direction, the greater the chances of your binary option contract expiring “in the money.”
But even though volatility created from news events can increase your profits from trading binary options, there is a very expensive mistake that can easily bite you when trading the momentum of market news.
I’ll get to that shortly, but first let me share a little personal experience that you may easily relate to.
When right is still wrong
When I was a new binary options trader, I used to research highly anticipated geopolitical news, predict the outcome, then enter a new FOREX trade immediately before the news was released.
The good news (at least for my ego) is that I was frequently right with my prediction of what the actual news release would be (such as government economic reports).
However, I quickly discovered that subsequent price action in the FOREX markets was rarely correlated to the actual news.
On countless occasions, I was “right” because I correctly predicted the “good” news that was released, yet prices moved lower regardless.
Conversely, what I determined to be “bad” news just as frequently led to rallies.
This means I was right at predicting the news, but wrong in predicting the actual FOREX price movement that followed.
Obviously, making money from trading binary options was more important to me than simply being right, so I knew I had to figure out what the problem was.
React to price action, don’t predict it!
Fortunately for my trading account, I eventually figured out my problem with “trading the news” was that…
FOREX prices were typically already factored into highly anticipated news events because the “smart money” was buying well before the news, not after the news like I was unsuccessfully trying to do.
There’s an old Wall Street cliche that says, “buy the rumor, sell the news.”
If you think about what this phrase really means, you will understand why trying to predict price action, rather than reacting to it, is a losing game.
Commit this to memory: the subsequent price reaction to a news event usually has no direct correlation to the actual news.
Therefore, the most expensive mistake that binary traders make is attempting to predict the price of an options contract, rather than simply reacting to the price movement.
In other words, many traders make the mistake of entering new binary option trades before an anticipated news release, simply because they have a good “feeling” about the news.
After years of experience with binary options trading, I now view this as merely gambling on the direction of the price that will occur after the news is released.
The profitable solution for your trading
The most profitable and least risky method of “trading the news” is to actually wait for the news to be released, then enter a new binary option trade only after seeing the actual price reaction to the news event.
To put the odds of a profitable trade in your favor when trading the news, simply wait for the news to be released and see the initial price reaction before placing your trade.
Don’t be a gambler by placing a trade before the news because you will inevitably be wrong more than you are right.
But even better than playing the difficult game of trying to profit from trading news events is to simply follow the binary option trade signals of a proven strategy that is purely based on reliable technical analysis patterns.
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