The GBP/USD currency pairing is a popular one for use in digital options trades. Similar to when trading with other currency pairs, both technical and fundamental analysis are going to be required if you wish to predict upcoming price movement with any degree of accuracy. The more you know about each currency, the more successful you’ll be. A higher level of success is just what this strategy aims to assist with.
British Sterling is frequently referred to simply as the Pound and is established currency of the United Kingdom and various U.K. territories. This currency is traded often inside the Forex marketplace, ranking just under the USD, EUR, and YEN in terms of overall activity. Regarding global reserves, the GBP ranks 3rd. Being one of the more widely used currencies, digital options traders appreciate the active price motion that it offers.
Your main goal should be to transform your knowledge of the GBP and USD into earnings. In order to do this, you’ll need to make use of fundamental news that specifically relates to the pair. One example is the United Kingdom Inflation Letter. This is composed by the residing Bank of England Chairman to the House of Lords. This letter makes reference to inflation and outlines how inflation is predicted to influence the UK economic condition in the coming months.
In order to understand the impact this letter has on trading, consider how it has swayed GBP/USD values in the past. In recent years, the report has not been very positive and has worked to drag down the British Pound. The United Kingdom has encountered housing market troubles, and the government had to seize control of Northern Rock, a leading mortgage lender within the country. Soon, problems made their way into the Euro Zone, which is now suffering from its own financial crisis.
Although the U.K. continues to be separate from the Euro zone, the EU is the UK’s most substantial trading partner. This means that the UK is certainly not immune from the Euro Zone crisis. In fact, the crisis has triggered record setting high inflation rates inside the United Kingdom. So long as the EU struggles, the Inflation report will likely continue to be negative. While not good news for the UK, this can be good news for those who trade binary options using this pairing.
The best digital options trade for use with this strategy is the basic Put/Call trade. When negative information (such as an unfavorable inflation letter) is released, the Put option is there for the taking. With positive information, the Call option is likely to be the best choice. Keep in mind that market sentiment can change quickly, but it may not remain strong for an extended period of time. The 30/60/120 second trades offered at brokers option plataform can be considered whenever you are concerned about sentiment changing quickly.
Another example of a sound GBP/USD strategy is to trade along with manufacturing data. This data is reported on a monthly basis. Both the United Kingdom and United States publish this data. Although you should decide on your position in advance of such data releases, simply knowing when the data will be released and whether or not it meets expectations can help you profit from digital options.