Trading the GBP/USD in the binary options market is not rocket science. It is a currency asset and just like other currency assets, it can be traded via technical analysis and fundamental analysis. In this article, we will show you how to use one or two fundamental analyses to produce trade results that work all the time specifically for the GBP/USD.
Trading GBP/USD Binary Options: Trade Setup 1
One of the ways to trade GBP/USD binary options is to use a fundamental news release specific to the GBP/USD, which is the UK Inflation Letter. This is a news release which is a letter written by the Bank of England Chairman Stephen King, to the House of Lords in England about the state of inflation in the UK and how this will affect the UK economy in the months to come.
In order to understand the fundamental basis of trading this news release, we need to look at how this piece of data has affected the value of the GBP/USD in the last few years, and the fundamental basis for this effect. In the last four years, the UK Inflation Report has not been favourable to the British Pound. The United Kingdom had its fair share of the housing market bubble which saw the government takeover one of the UK’s biggest mortgage lenders, Northern Rock. Over time, the economic contagion spread to the Eurozone which has now been shown to have been the economy that has been hardest hit by the global financial crisis. While the UK elected to stay out of the Eurozone and preserve its currency unit, the fact that the EU is the UK’s largest trading partner means that the UK has not been insulated from the economic happenings of the EU. It is a case of one person sneezing and the other catching a cold. This has left the inflation rate at all-time highs in the UK, and has meant that the UK economy has taken a beating from the EU woes.
The fact is that until the EU economy starts to show real signs of improvement, we will not see a favourable UK Inflation report for some time to come. This report is released quarterly and can be seen live on Bloomberg TV as it happens, giving the trader time to play this out on his binary options platform.
The preferred trade for this report is a High/Low (Up/Down or Rise/Fall) trade. Obviously the bias would be for a Low (Down, Put, or Fall) outcome. Get to your trading platform five minutes before the start of the press conference, and immediately execute the option. The market price on entry is the price barrier. Set your trade expiry to anything between 15 to 30 minutes. We took this trade the last time it occurred and we got the result we were expecting. You can see the summary of this trade on the charts below.
Trading GBPUSD Binary Options: Trade Setup 2
Another market data release that greatly impacts the GBP/USD is the UK manufacturing data. This is a monthly release. This trade is not as straightforward as that of the Inflation Report. This is because the numbers vary; sometimes it is good and sometimes bad for the GBP. As such, you have to wait for the release of the news to the market before making a decision. To be on the safe side, it is preferable to trade a price barrier away from the direction of the news release as a No Touch trade.
Please practice these on demo before applying the strategies to a live account.