Lesson 1: The Best Times to Trade Binary Options
Welcome to our new series on binary options trading for beginners, where we will take you by the hand and show you a systematic way to trade binary options. Today we will touch on the best times to trade binary options.
Binary options’ trading involves trading several assets and making money based on the outcome of the price direction. Some of these assets are traded on a 24-hour basis: here we have currencies, commodities and stock indices. Stocks are not usually traded on a 24-hour basis. The trading hours of a stock market determine the times at which a stock listed in that market is traded. When you take the time zones of the trading capitals of the world into consideration, this gives different trading hours for trading stocks on the binary options market.
The binary options market is one where traders make money based on predicting direction, and volatility is what gives price action direction in the market.
Trading works best when the market is bubbling with activity from traders all over the world. When there is good trader activity in the market, it generates the liquidity and volatility needed for the underlying asset to get to its target before the option expires.
Even though assets like currencies and commodities are supposed to be 24-hour markets, there are only certain times of the day when the market activity is at its maximum. This is usually when we have an overlap of the trading zones of the world.
Because not all assets have the same trading hours, we will discuss the various classes of assets as separate entities, taking into account their own peculiar trading hours.
Timing for Stocks
As we mentioned earlier, stocks are usually traded for a maximum of 6 to 8 hours a day. Stocks of most major companies outside the US are traded on the US stock markets as American Depository Receipts (ADR). As such, the US markets are used as the benchmark of checking the trading hours for stocks. US stock markets usually trade from 9.30am EST to 4pm EST.
However, there are other markets in Europe that are just as important, such FTSE (7am GMT to 3.30om GMT) and the Xetra Dax (8am GMT to 4.30pm GMT) in Germany. If you are trading stocks in the binary options market, pay attention to the times at which the stock markets in which they are listed are in operation.
Timing for Currencies
The forex market is most active when there is an overlap of the London/Asian and London/New York time zones. The diagram below gives a perfect illustration of this.
You also need to know that the local currencies of the active time zones will have increased volatility over others. For instance, the Australian Dollar will be more active during the Asian/London time zone overlap than the London/New York time zone overlap.
Timing for Commodities
Commodity markets are most active at the following times:
Crude oil (NYMEX.CL) – 9am EST to 2.30pm EST
Natural gas – 9.30am EST to 5.15pm EST
Corn – 9.30am EST to 1.15pm EST
Gold – 8.20am EST to 5.15pm EST
Silver – 8.25am EST to 5.15pm EST
Another way of studying the trading times would be to group the commodities under the exchanges where they are traded. As such, the agricultural commodities, which are traded in the Chicago Mercantile Exchange, are more actively traded from 9.30am EST to 1.15pm EST and from 6pm EST to 7.15am EST the next day.
Full information on trading hours is available on the CME Group website.
Timing for Index Futures
Stock indices are CFD instruments that measure the movement of the relevant exchanges, As such, the DJ30, NASDAQ100 and S&P500 will conform to the US markets open from 9.30 am EST to 4.30pm EST, and the DAX30 will conform to that of the Xetra Dax’s trading hours.
Once you master the trading hours for each asset, you are one step away from potential profitability in the market.