Trading GBPUSD election results with binary options provides low risk entries into a volatile market. Here is the way I traded it yesterday.
Trading GBPUSD Election Results with Binary Options
I was watching the Daily GBPUSD chart because it was forming bearish hidden divergence at an ATR — one of my core trade setups. If the ATR held prior to the election, then more likely than not the market would go down. The Overbought status on the TradersHelpDesk was additional confirmation that the market would likely go down.
While the daily binary options had a higher than normal premium (typical when market volatility is expected), I choose the GBPUSD Weekly binary option at 1.2825 for only $11 of risk (around 2pm New York time).
However, even with the best technical analysis pattern, when trading GBPUSD election results with Binary Options the market can go against your position. Therefore, I did a protection order at 1.3025 for $13 of risk. In other words, as long as the market moved, I would potentially make profits.
The close for the day was 1.2949. When the market reopened at 6pm New York time, the GBPUSD gapped down and opened at 1.2742 off an election poll that showed the Conservatives would not capture the needed seats. A few minutes later I had a profit of $55.75 per contract and closed the short position. Even after allocating for the $13 loss on the long side (which still has a potential if they close the gap), the profit per contract for trading GBPUSD election results with binary options was $42.75.
The key to both trades was the low risk entry. Even with both a long and short position on, I only had a risk of $13 on the long and $11 on the short. This allows me to capitalize either way the market moves (in case of a surprise and price went up). If the risk on the long had been more than $25, then I would have only taken the short side as I needed ample room for profits after subtracting the protection order.
I also wrote about the chart pattern prior to the election. Using the same daily chart as above, I wrote:
The UK elections may create some movement during the US session, but the majority of the movement is likely to come in during the Asian session. Currently, the daily chart is showing a potential for hidden divergence to the downside forming. If this price holds, price could well be pushed down through the 1.2745 area. The reversal bar formation is key to this pattern, and may form today.
Would I have traded this setup on the spot forex side or currency futures side? No. Trading spot or currencies directly would have exposed my account to a huge loss if I were wrong.