The Best Times of the Day to Trade Binary Options
There are certain times of the day that are advantageous for trading binary options if you're using hourly expirations. Unlike more traditional forms of day trading, extreme volatility doesn't work to your advantage if you're trading hourly binary options. The reason for this is you can generate high levels of returns on very small movements in the underlying security. If you buy a binary call on Google, you don't need the stock to go up $10 per share to make a decent profit. If the stock only goes up $.01 by expiration, you can make an 80% return.
Because of this, you should look for a market that is moving in a clear direction, and doing so in an organized fashion. Because of this, you should avoid placing trades in the first 30 minutes of the trading session and trades that will expire in the last half hour of the trading session. The beginning and ends of the session have the highest level of volatility and often lack a clear direction as buyers and sellers work to open and close positions.
Trading sessions are much more orderly the closer you get to the middle of the session. The one exception to this is we try to avoid trading during lunch hour in the time zone of the exchange. In other words, avoid trading binary options on US stocks from 11:30am to 12:30pm Eastern time. The reason why we avoid that hour, even though volatility is generally low, is that many of the professional traders aren't active during this time. Their lack of activity means retail investors have a bigger effect on the trading, which can lead to disorganized trading and lack of direction.
Taking it a Step Further
In addition to avoid more volatile times of the day, you should also consider the day itself. Much like the beginning and ends of the trading session, the beginning and ends of the week tend to be more volatile and often lack clear direction. Because of this, we always shy away from trading binary options early Monday morning and late Friday afternoon. Early in the Monday trading session, traders are trying to digest all of the news from the weekend. Late in the session on Friday, traders are trying to protect themselves from any surprises over the weekend. This becomes more pronounced on 3-day weekends. Once again, we don't want to trade when longs and shorts are in a tug-of-war with each other.
These recommended trading times are generalities, not hard and fast rules. We've made plenty of profits during the times we tend to avoid, and we've had plenty of losses during times we felt the market was organized and moving in a clear direction. However, with binary options trading we want to do everything we can to increase our probability of a winning trade. Avoid trading at times of high volatility, and you'll greatly improve your odds of success.
If you're going to trade binary options there are a lot of brokers to choose from. However, we feel the Global Option is by far the best one.
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