Weekend trading with binary options allows traders to trade seven days a week. To use this tool in the best way possible, there are a few things you need to know, though. This article explains the details of weekend trading and how you can succeed in trading online at the weekend.
This article answers these questions:
- Trading On The Weekend
- Why Trade At Weekends
- Downsides Of Weekend Trading
- Weekend Strategy
With this information, you will be able to succeed at weekend trading with binary options.
Trading On The Weekend
Most binary options traders intuitively assume that they are unable to trade binary options on the weekend – which is a misconception. Of course, the Western world provides every indication to support this thesis. Luckily, there is more than just the Western world.
Other cultures have different work weeks. Consequently, their stock exchanges are open on different days of the week. In the Middle East, for example, the work week runs from Sunday through Thursday in some places and from Saturday through Wednesday in others. The stock exchanges follow this pattern.
To trade a binary option, you need an open stock market. When the market moves, you can make predictions about where it will go. As long as there are some open markets in the world, you can trade binary options.
The Middle East alone is enough always to guarantee an open market over the weekend. With some stock exchanges open on Saturday and some on Sunday, the weekend is full of trading opportunities.
Traders who like to trade binary options based on currencies and commodities can use weekend trading to follow trends they have found on Friday or complete other trading goals. Currency pairs are traded on stock exchanges around the world, and as long as there is one open stock exchange, you can always continue to invest. There are even courses in ‘weekend effect’ trading strategies specifically – highlighting the popularity.
Leading Weekend Brokers
Why Trade At Weekends?
There are three main reasons why traders choose to trade on the weekend. They are:
- The weekend offers the ideal trading environment for some strategies. When only a few Asian markets are open for trading, the market behaves differently than when most European and American markets are open. The different market environment helps some traders to execute their strategies better than any other market environment. We will later present a few of these strategies.
- More trading time means more profits. With a profitable strategy, more trading time means more profits. Traders with free weekends can use binary options as a profitable alternative to TV and boredom. Dedicated traders might trade seven days a week.
- Some people can only trade the weekend. If you are busy on weekdays, the weekend might be your only chance to make a few trades. With a broker that enables you to trade when are free, you gain the chance to combine a trading career with a busy schedule.
These reasons are why so many traders like the opportunity of trading on the weekend. On the other hand, weekend trading suffers from a few limitations, too. To help you weigh both aspects, let’s take a look at the disadvantages of weekend trading.
Downside Of Weekend Trading
While you can trade binary options on the weekend, there are some limitations. They are:
Issue 1: Only A Limited Selection Of Assets
On the weekend, you can only invest in a limited selection of assets. Stocks and indexes are traded at their home stock exchanges. For example, Google, Apple, and McDonald’s are American companies and traded on the New York Stock Exchange. When the New York Stock Exchange is closed, you are unable to trade binary options based on these assets.
At times when only the Middle Eastern markets are open for business, you can only invest in their stocks and indices. For serious technical analysts, this is no problem – they only trade price movements anyway and are indifferent to the underlying asset.
For traders that want to trade the news or like to know something about the assets they trade, however, this is a problem. They might face a selection of stocks and indices they have never heard before. This can be a difficult situation for some traders that makes weekend trading infeasible.
These indexes are available for weekend trading:
- DFM Index(Dubai, United Arab Emirates),
- Tel Aviv 25 Index(Tel Aviv, Israel),
- Kuwait Stock Exchange(Kuwait),
- Tadawul Index(Saudi Arabia).
If you can work with these indexes, go ahead. If not, you better keep trading weekdays.
Forex weekend trading hours extend much further. With no central market, currency is traded around the globe. When London stops trading, Hong Kong is still going for example. This means forex trading is possible 24 hours a day, for almost 6 days of the week. Weekend Gold and Oil trading markets are similar. During certain times however, volume will be very low. This leads to flat markets and charts.
Issue 2: Different Time Zones
Every stock exchange operates in its own time zone. Stock exchanges in the Middle East are far from the United States and many other places, which is why there is a significant time delay. To trade stocks and indices of these stock exchanges, you have to account for these time delays.
For binary options traders that like to invest in stocks and indices, this means to significantly change their trading routine. They might have to get up in the middle of the night or at least trade during different times than during the week. If this is impossible or not worth it to you, you should focus your stock and index trading on weekdays.
Issue 3: Broker Trading Times
Some binary options brokers close their trading platforms over the weekend. In their view, there are so few traders that want to spend their weekends doing technical analysis that the efforts simply isn’t worth it.
If you want to trade on the weekend, check your broker’s trading times or contact customer support. If your broker is closed on the weekend, there is nothing you can do aside from switching brokers. If weekend trading is that important to you, check our broker list for a few good tips.
Some brokers will simply reflect the opening ours of the markets in question – the majority will stay open when the forex markets do for example. Tools such as Metatrader 4 (MT4) will operate either on past data, or live data, but only when the market is open.
The market environment is different during weekend trading than during the work week. While this does not mean that you need entirely new strategies, you have to understand the unique characteristics of the market and match them with the right trading strategies.
Here are three strategies that can help you do that.
Strategy 1: Trading Closing Gaps In Currencies
Trading Closing gaps requires a market environment that is ideal for the weekend. By trading exhaustion gaps in currencies over the weekend, you get the best kind of environment for this type of strategy throughout the entire week. Weekend gap trading on forex is a popular system.
Gaps are price jumps. From one period to the next, something strongly moved the market, which caused the price to jump from one price level to a higher or lower level while omitting the prices in between.
Gaps occur for a number of reasons. For example, they can be the result of beginning new movements or accelerating movements. But these gaps require a high trading volume. To start or accelerate movements, many traders have to support the change. Otherwise, it will quickly run out of energy. On the weekend, there are simply too few traders around for these types of gaps.
On the weekend, the big Western bankers are at home. Most day traders are out with their families, and small investors take a break. Without these major players, the start of new movements is improbable. You are more likely to see closing gaps.
Gaps close when only a few traders created them. Sometimes, a few people invest in the same direction, either by coincidence or because they all got caught up in the same indication. The market jumps up or down, and the rest of the traders are puzzled. They consider the advancement to be a mistake, believing that the new price is too high or too low, depending on the direction of the gap. These traders will immediately invest in the opposite direction, trying to profit from the mistake.
- In the case of an upwards gap, traders will sell their assets. The market will fall and close the gap.
- In the case of a downwards gap, traders will buy the The market will rise and close the gap.
When you find gaps in low-volume market environments, there is a high chance that they will close. The weekend is a low-volume trading environment, which makes it the perfect time to trade this strategy.
Knowing that a gap will close, you have everything to trade a binary option with a high payout.
- You know the price target. The market will move roughly until it reaches the price level of the first candle stick that makes up the gap. After upwards gaps, it will likely fall to the high of the first candlestick; after downwards gaps, it will likely rise to the low of the previous candlestick.
- You know the expiry. The market is likely to reach the target price within the next period. Only on extreme short periods, you should consider choosing a longer expiry.
With this information, you can trade a high/low option, but you can also invest in a one touch option, which creates a higher payout. Choose an option with a target price inside the gap and an expiry shorter than one period. If your broker offers no such option, choose a high/low option with an expiry of one period.
We recommend using this strategy with currencies or commodities. With most of the world on break, you know that the trading volume of these asset types is lower on the weekend than during the week. The Middle East stock market, on the other hand, could still experience a high volume because the traders in these countries are still at work. Therefore, the Western weekend has less of an effect on the trading volume.
Strategy 2: Trading Breakout Pullbacks With Currencies
This strategy uses a similar philosophy as the first one but adapts it to different market phenomenon – the breakout and the pullback. Breakouts occur when the market completes a price formation or breaks a resistance or a support. At these price level, many traders place orders in the same direction, which leads to quick, strong movements.
To start a sustainable movement, the breakout needs a high trading volume. When the volume is low, the breakout lacks the support of the majority of traders. There is insufficient faith in the movement, which motivates traders to invest in the opposite direction and bring the market back – this movement is called the pullback.
For example, assume that an asset is stuck in a sideways price channel. It tried to leave the channel a few time before, but every time the market approached the upper or the lower boundaries, it turned around.
On the weekend, the market attempts to break out of the formation again. This time it moves past the boundary. During the week, this event might end the formation and start a new movement. But on the weekend, the trading volume of currencies is so low that it is more likely that the market will pull back.
Generally, trustworthy breakouts are accompanied by a high volume. Movements beyond a formation’s boundaries that are accompanied by a low volume are likely false signals. On the weekend, the chance of false signals is so high that it makes sense to predict a pullback for every payout.
You can trade the pullback in a number of ways. These ways are:
- With high/low options. When you find a breakout on the weekend, invest in a high/low option that predicts that the market will pull back inside the formation. Use an expiry of around 2 to 4 periods. For example, on a 10-minute chart, you would use an expiry of 20 to 40 minutes. This strategy can win you a higher percentage of your trades, but it creates a relatively low payout per winning trade. We recommend this strategy to risk-averse traders.
- With one touch options. You win a one touch option when the market touches a predefined target price. After a breakout on the weekend, you can use the boundary of the price formation as your target price. The market is likely to pull back at least this far. Use the longest expiry that still offers you a target price within this reach, and you have a good chance of winning the trade. This strategy is slightly more risky than using high/low options, but it should get you a higher payout. We recommend it to traders that like to take a little more risk.
- With ladder options. Ladder options are a mix of one touch options and high/low options. They define a target price, and you can predict whether the market will trade above or below this price when your option expires. When you find a breakout on the weekend, you can use ladder options to predict that the market will soon trade within the boundaries of the formation again. Use an expiry between 2 and four This is the riskiest of these three strategies, but it is also the strategy that creates the highest payouts.
Each of these three strategies can work equally well. Choose the one that best suits your character.
Strategy 3: Trading Bollinger Bands With Currencies
Bollinger Bands define a price channel that the market is unlikely to leave. On the weekend, this price channel creates exceptionally accurate predictions, which makes it the perfect basis for a trading strategy.
Bollinger Bands consist of three lines:
- A middle line. A 20-period moving average.
- An upper line. The moving average plus two times the standard deviation.
- A lower line. The moving average minus two times the standard deviation.
The lower line works as a support, the upper line as a resistance. The middle line can be a support or a resistance, depending on whether the market is currently trading above or below it. Generally, the market is likely to turn around when it approaches a Bollinger Band.
Bollinger Bands can be a great help at any time of the week, but they work even better on the weekend. During the week, unexpected news can change the market environment, and the many active traders can start new movements or end old ones at any time. Consequently, the trading range varies more.
These events are not inherently bad, but they make the use of Bollinger Bands more difficult. When the standard deviation changes, so will the upper and the lower Bollinger Bands. Strong upwards or downwards movements will stretch the Bollinger Bands and take their boundaries with them on the ride. Predictions made on these bands will quickly become useless.
On the weekend, the low trading volume makes the market much more uniform. The chance that a large group of traders will jump in on a movement and suddenly alter the market environment is much lower, which makes the use of Bollinger Bands easier and more accurate.
Here’s what you do with this strategy:
- Create your chart. Choose an asset, open the price chart, apply the Bollinger bands.
- Wait for the market to approach a Bollinger Band. Wait until the market moves close to one of the three lines of the Bollinger Bands.
- Predict that the market will turn around. Invest in a high/low option that predicts that the market will fail to break the Bollinger band.
This strategy is very simple. Even newcomers can immediately execute it.
Weekend trading with binary options offers unique opportunities in a unique market environment. To take advantage of weekend trading, you need a broker that offers these trading times and the willingness to either trade currencies and commodities or stocks and indices from the Middle East.
You can trade stocks and indices from the Middle East with the typical binary options strategies. When you decide to trade currencies and commodities, however, you must adapt your strategy to the significantly lower trading volume on the weekend. There are enough opportunities to make trading at weekends worth the work and reading up on.