Binary Trading During the Holiday Season

During the holiday season, as a result of many people going on vacation, online stock trading on all financial markets is thinner with much lower trading volumes. This generally results in far smaller price fluctuations in stocks and commodities. Forex markets tend to behave differently with different influential countries celebrating some of the holidays at different times. Metals markets are closed on certain US holidays and it is advisable to check the days on which they con't operate if you are actively trading in that market.

There will be tighter limits in the markets. The results of thinner trade have historically been observed to have much tighter upper and lower limits in respect of equity and commodity markets. Adopting a limit bound strategy during holiday periods is recommended because with thinner trading, it is easier to pick up market trends. With a small upward trend, the way to go is to buy Call options with short to medium time lines while in a depressed market with resistance to higher prices, buying Put options would probably be more profitable.

Stock trends before holidays. Numerous studies by academic researchers have found that stock prices increase abnormally before holidays, such as the 4th of July, and return to previous levels when trade resumes after the holiday. This trend can be useful for binary options traders, trading both Call and Put trades in line with the historically observed trends. The identical trend has been found in the United Kingdom and Japanese equity markets despite their holidays being at different times to the US.

Forex markets and holidays. Forex markets are more easily affected by political events and economic indicators than equity or commodity markets. During holiday periods, most politicians enjoy vacations along with the rest of us, with very little political activity taking place while economic data reporting is also not done during holiday periods. With neither of these factors having to be taken into account, Forex markets generally are very flat during holiday periods and should be considered risky for binary options traders.

Caution needs to be exercised when trading before and during holiday seasons, but there is no doubt that a change in markets conditions will present opportunities for the binary options trader who has studies the markets and taken correct note of historical trends.

Source: invezz.com