Using Binary Options To Trade Economic Events

The market is moved by news events. When the FOMC speaks about happenings with the Fed Funds, traders are all ears trying to gauge which way the market is going to move. These movements have an impact on the way traders trade different markets.

The Federal Funds Rate is the interest rate institutions use when lending amongst themselves. The actual rate is determined in the open market, but the FOMC sets a target Fed Funds Rate as a guide. The Fed can further influence the actual rate by buying and selling government securities in the financial market.

Published by the US Department of Labor, the Jobless Claims tallies weekly unemployment benefits claims. If there is an increase in claims, this typically indicates a weakening labor market. If there is a decrease in claims, this usually indicates there is a strengthening in the labor market.

In the US and abroad, one of the most anticipated items on the trading calendar is the Nonfarm Payrolls. Published by the US Bureau of Labor Statistics, this report tells of the monthly change in the total number of paid US employees, excluding the following categories:

• Farm employees
• General government employees
• Private household employees
• Employees of NPOs assisting individuals

It's estimated that workers on the Nonfarm Payrolls account for roughly 80 percent of the GDP in the US.

Generally, a strong labor market has a positive impact on the overall economy. Household spending power is increased when there is an increase in the number of jobs. An increase in the number of jobs also implies an increase of consumption and economic growth.

Two popular strategies to use with binary options when trading economic events are the Iron Butterfly and the Strangle. An Iron Butterfly is a good strategy if the economic event is not expected to cause much movement in the market, as it is a neutral strategy. It is ideal for flat markets. The Strangle is just the opposite, and is used when movement is expected but the direction is unknown. It has low risk since two out of the money (OTM) contracts are traded, one being bought and one being sold.

Apex Investing offers free trading education at www.apexinvesting.com.