Binary Options Market Pull trading strategy tutorial
The market pull strategy is considered by many experts to probably be the most popular of all binary options strategy because of its many benefits. In order to effectively implement this tool, you will need to track the release of all news items affecting those assets tradable by binary options. Basically, you need to assess in which direction the markets will pull those securities that will be directly affected by the latest releases. To obtain maximum impact from applying such strategies, you must also appreciate that the affected assets can also influence the directional movements of other commodities or companies that are directly associated with them. For example, a drop in the value of Microsoft shares could generate a rise in those of Google.
So, this strategy looks definitely promising but how exactly does it function? A good way to obtain an appreciation about Market Pull strategies is to consider an example. Envisage that a news item has just been posted disclosing that the US Federal Reserve has cut its benchmark interest rate which is causing the US Dollar to weaken. Consequently, you decide to open a CALL binary option using the EUR/USD as its underlying asset in order to exploit the fact that the markets are pulling the greenback lower
However, professional traders also know that the price of gold has a strong negative correlation with the US Dollar. This feature implies that when the price of the greenback rises than that of gold plummets. Consequently, you could evaluate the validity of executing a CALL binary option based on gold as the negative impact on the US dollar created by the recent news release will pull the price of gold higher.
In order to maximize your profits at trading binary options, you must realize that there are very strong associations between various assets. If you can learn how to identify these trends then you will increase your chances greatly at becoming a successful trader. Market Pull strategies can help you greatly accomplish this task by making you focus on the positive or negative correlations existing between many of the assets serviced by binary options brokers. The investment of your time and energy studying the merits of such strategies will assist you in acquiring a positive edge when trading binary options
You can now gain a deeper appreciation of the benefits possessed by Market Pull strategies by analyzing two popular variants. This first is centered on the central aim of exploiting the price deviations of two closely correlated firms that trade within the same market sector, e.g. Shell/BP, JP Morgan/Goldman Sachs and Apple/Microsoft, etc.
Although the theory is comparatively simple to understand, executing this strategy proficiently does rely on an enhanced understanding of the financial markets and the relative operating performance of the competing companies. Consequently, this approach is not deemed to be suitable for beginners because of the specialized knowledge required. However, if you are willing to persevere, then you will discover that this strategy can deliver impressive profits with minimum risk exposure.
Essentially, this tool operates as follows. Imagine that Apple has just announced that it will shortly release a brand new mobile device. As this news will pull the shares of the company higher, you execute a CALL binary option using Apple as its underlying asset.
After you also conclude that Apple could now capture some of the market share of important competitors, you could subsequently execute a PUT binary option constructed on Google using exactly the same wagered amount and expiry time, etc. By doing so, you would have created an opportunity to acquire a double return while reducing your risk exposure. You would have achieved this impressive situation by exploiting the market pull on Google created by Apple.
The second Market Pull Strategy is considered by many experts to be very effective and capable of generating consistent and worthwhile profit streams. However, as a definite level of skill is unquestionable required to operate this variant proficiently; it is not classified as being suitable for beginners.
Basically, the primary concept is to activate binary options based on commodities and hedge them with ones structured on assets that are directly affected by them. For example, imagine that news has just been released disclosing that there has been a significant surge in the price of oil. Such an event could also impact currency pairs that are closely correlated with oil, i.e. the Canadian Dollar.
Consequently, if you deduce that the price of oil is now set to rise in the imminent future then you could open a CALL binary option structured on this commodity. In addition, if your analysis also confirms that the oil markets will subsequently pull the Canadian Dollar higher, then you could double your bet by simultaneously instigating a PUT binary option by deploying the USD/CAD as its underlying asset. When doing so, you must utilize identical parameters as you did for your initial trade, i.e. same deposit size and expiry time.
By performing this action, you would mitigate your risks by diversifying your investment portfolio as they would now be spread between two trades instead of one. In addition, if your analysis proves correct, then you would gain the opportunity to acquire two payments at expiration if both of you positions finish ‘in-the-money’.