How to Trade USD in Binary Options

How to Trade USD in Binary Options

Submitted by adil on Mon, 02/16/2015 - 09:04

Due to the popularity and flexibility of the Forex trading, traders no longer have to rely on traditional investment methods; rather more reliable and faster online method is available. The binary options trading is another beautiful technique developed for ease of the traders. The simplicity of the binary options and the flexibility of the Forex trading have been combined to create this new market strategy that is much easier to master.

Trading USD currency pairs in binary options

Being the world’s reserve currency, these strategies mostly involve trading with US Dollar (USD). Due to the highest flow and liquidity of the USD, the trading costs are low and the price movements are more stable. For example, EUR/USD currency pair has the maximum order flow and the highest liquidity in the whole Forex market. Trading in this currency pair will normally have low amount of volatility. The spread is also low so it is suitable for the beginners. In contrast, currency pairs like GRP/JPY are more volatile and are suitable for only experienced binary options traders.

Forecasting USD trends

To make profits and to win the trades in this market, you will need to be able to forecast the dollar trends. In order to take a buy or sell position, you need to know the underlying trend. For example, it is important to know if the dollar is trending in a positive bullish context or in a negative bearish context. There are various factors which can be used to forecast the direction of UD Dollar. To begin with, it is important to know the economic state. This can be done by watching non-farm payrolls, retail sales reports, GDP growth, inflation rate, and unemployment rate etc. Although this is a convoluted process but the main purpose is to understand how these factors and statistics affect the interest rates at US central bank. If there is a signal that the interest rates will raise, then buying activity will increase in the USD. If the interest rates are going to reduce, the US Dollar will slow down the buying activity.

Technical analysis and strategies

Apart from the economic indicators, another way of predicting the USD movement is by using chart indicators and technical strategies. For example trend line analysis can help in understanding the market momentum. If the prices are making higher highs and higher lows, then USD is in an upward trend and should be bought. If the prices are making lower highs and lower lows, then there is a downtrend and US Dollar should be sold.

Moreover, indicators like MACD (Moving Average Convergence Divergence) and RSI (Relative Strength Index) can also be used. These are very helpful in determining if the value of US Dollar is becoming too low (oversold) or too high (overbought).

 How to catch the USD trends

In order to catch the US Dollar movement trends and to make money through it, only one indicator or factor would not suffice. You will have to combine all of the fundamental and technical analysis tools to get a strong idea of the next move of USD. For example, if the economy shows lower interest rates and your chart indicator says that the USD is overbought, also the trend line shows a breaking bullish behavior then you should consider selling positions. In the opposite case, it will be time to buy the positions.

To sum up

It is important to understand the developing trends of the US Dollar; this is the only way to predict the market place in binary options and Forex market. Once you understand the fundamental factors and the price chart patterns, you will be easily able to determine the trends and turn the odds in your favor.