Binary Options Trading the Next BOJ Intervention
The BOJ recent monetary policy meeting has failed to produce any material effect on weakening the Japanese Yen exchange rate. This is a particularly important event risk because the markets are increasingly dubious about the effectiveness of monetary policy. The Bank of Japan has upgraded its stimulus program to an extraordinary pace, it was the first major central bank to introduce negative interest rates in late January, and more recently adopted more easing or stimulus. Despite all of this the Japanese Yen continues to appreciate which is in contrast with what we would expect because, at least in theory, more stimulus should lead to a devaluation of the currency.
Because the Japanese Yen strength is hurting Japanese companies this prompted the BOJ to take a strong stance threatening a possible direct intervention in the Foreign Exchange market which inevitably leads to extraordinary binary options trading opportunities.
Why Binary Options Trading?
The benefits of binary options trading are enormous when trading volatile events such as the BOJ intervention because usually, volatility equals to more binary options trading opportunities. The biggest advantages are the fast payouts that are almost guaranteed because during the BOJ intervention the market gets fast one sided price movements and you only have to trade that side of the market, meaning only buying Call Options in the USD/JPY currency pair.
Binary options trading is a great way to trade the BOJ intervention because it has a low risk of ruin and is very helpful for you to protect your money even during fast news events. Unlike Forex trading, where you can lose more than your account balance and end your account with a negative balance, with binary options trading you always know how much you’re going to lose as this is predetermined by your initial investment in a Putt or Call option. You are in control of your maximum risk which will help you reduce the uncertainty in binary options trading.
How to trade binary options successfully during the BOJ intervention
More recently some Japanese policy members warned they could intervene in the currency market to tame the excessive Yen strengthening. If you want to find more about how to trade binary options successfully not just during the BOJ intervention, but also during any other major risk event then going forward, we’re going to provide you with a simple binary options strategy.
The BOJ intervention will likely have a strong effect on the Yen pairs and since the aim of the intervention is towards weakening the Japanese Yen we would expect USD/JPY to rally.
Binary Options Trading Strategy
A simple binary options trading strategy will be to buy Call options because we’re expecting only strong upside movements in USD/JPY. In order to maximize our potential profit, we want to make sure we trade as often as possible. This leads us to choose short expiration times like 5 minutes expiration time or even 60 seconds if you’re an experienced trader that can execute binary options trades in a fast trading environment.
How to trade binary options successfully using short expiration times is to correlate the expiration time with short time frames. If, for example, you trade using a 5 minute expiration time than it’s wise to use a 5-minute time frame in your analysis. Usually, the most demanding aspects of binary options trading with short time frames are the volatile and erratic price movement of the market.
The key on how to trade binary options successfully with short time frames is to only trade when you have a big risk catalyst that can disrupt the market volatility such as the BOJ intervention. If we don’t have a big risk event that can produce one side price reaction than the market can have big whipsaws moving back and forth without a clear direction in which case binary options trading can’t be suitable.
Binary Options Trading the BOJ Intervention
To better understand how binary options trading works in an environment driven by a big risk event, let’s go through a real-time trade example happened during the latest BOJ monetary policy meeting. On 21 September we had a failed indirect BOJ intervention that caused extreme USD/JPY volatility. This was an indirect type of intervention in the currency market because the BOJ tried to devalue and manipulate the Japanese Yen through the means of monetary policy.
Figure 1: USD/JPY 5M Chart
For the purpose of this example and as mentioned in the previous paragraphs we’re going to trade using the 5-minute time frame. In the figure above we have the USD/JPY 5-minute chart and we highlight how to only buy Call Options during the BOJ intervention because of the expectation of a strong rally.
We would like to be involved in these types of price reaction as much as possible, thus at the start of each new 5-minute candle we’re going to buy a Call Option with a 5 minute expiration time. We want to repeat the same process over and over again until the market reaches a climax point and stops moving in our desired direction.
We can note that during the BOJ intervention we had 12 candlesticks until we reached a climax point or a top where we run out of the bullish momentum. Out of the 12 candlesticks, only 3 candles ended up lower than the opening price so if we were to follow our binary options trading rules and would have bought a Call option with a 5 minute expiration time at the opening of each candle we would have won 9 times out of 12 binary option trades.
The market consensus is that the BOJ will soon intervene in the currency market to weaken the Japanese Yen and if that is the case now, you have a reliable and simple binary options strategy to benefit from the next major big event in the FX market.
We have proved that you can have remarkable achievements and what matters most when trading binary options is choosing the right binary options strategy which is suitable for the current market environment. Usually, how to trade binary options successfully will be dependent upon your level of experience and the more you trade the more proficient you’ll become with this type of binary options trading strategies.