Sometimes, different events will play off of each other and give each other fuel for momentum. These can be positive events, or they can be negative. On Friday, November 13th, the market responded to two different events in a negative fashion. These were oil’s drop in price and the S&P 500 reaching an important milestone when it comes to technical analysis. Let’s take a look at these two events and see how you should approach them with your binary options trading.
The first major event was the fact that crude oil futures fell by over 2.4 percent, over a dollar in price. Oil settled at $40.74 per barrel, coming in near the low point of its recent fall. Crude is the most popularly traded commodity in the world, and its instability has led to volatility all over the world. A bad day for oil may be corrected in the next day of trading, but the immediate impact can drag down other assets. This is exactly what happened on Friday. It led to the second event.
Because of the already occurring uncertainty that exists in the U.S. stock market, oil’s price drop helped contribute to further price drops in major stocks. Overall, the major indices all suffered. The Dow Jones Industrial Average dropped by 1.16 percent, the NASDAQ dropped by 1.54 percent, and the S&P 500 dropped by 1.12 percent. The S&P’s decline is the one that’s the most troubling because most serious investors now consider this index to be the most indicative of the U.S. economy as a whole. And with today’s drop in value, the S&P’s price dropped below the 100 day moving average line. For technical analysts, this is considered to be a sign that going short on the index is a good idea. This type of mindset helped exacerbate falling prices, making a delicate situation worse. It ended up fueling a lot of reactionary trades as more and more people jumped in on the selloff.
In the heat of a trading day, trying to find situations like this can be really hard. However, it’s not tough to keep tabs on some of the major markers that exist across the world. You should have some sort of way to figure out quickly throughout the day when major price changes occur. It will help you find new trade ideas that you would never have thought of on your own. This is true even with binary options, where you may be limited in your asset choice depending upon which broker you use. Keeping a streaming service of major markers like crude oil, the U.S. dollar, the euro, the S&P 500, gold, and big companies like Apple and GE will help you to keep a pulse on what the market as a whole is doing across the world. Major price swings can help you to identify if a trading opportunity exists. Also, make sure that you know how relationships between these assets tend to play out. For example, the general knowledge that gold and the U.S. dollar react in an inverse relationship is helpful. It’s even more helpful if you know that this relationship is a long term one, and price changes are not immediate. So if you see gold going up in price for a few days, having a trade that takes this into account a day or two later on the dollar if the conditions are otherwise correct for it, is a very smart idea. It’s the little things like this that can allow you to take your trading to the next level and start finding profitable trades that you might never have considered before thinking like this.