The presidency of Donald Trump is unlike any other. Whether you consider that good or bad, as a binary options trader, you have to adapt to it. We have the most important of points every trader should consider during the Trump era. With the right strategies, you can turn them into great opportunities.
In this article, you will learn:
- Don’t trade presidential news
- Long-term currency investors should monitor Trump’s spending
- Trump’s deregulation plans and binary options
- Binary options might help you beat inflation
With these strategies, the Trump presidency can be a great opportunity for you.
Don’t Trade White House News, Trade Fed News
During his short time in office, Trump has already done many things that would have caused the markets to collapse during any other presidency. None of them seemed to have any effect on the market.
This development is important to news traders. Traders who previously invested based on news coming from the White House have to be careful. Bad news is unlikely to lead to falling prices, and good news is unlikely to have an impact, too. For the near future, it seems best to ignore White House news.
This development is partly due to strong fundamental influences on the market. Central banks all over the world have flooded the market with money, and this money has to go somewhere. Sooner or later, it has to find its way to the stock market.
This stream of money depends on the willingness of central banks to keep providing cheap money. Recently, the U.S. Federal Reserve has signaled that it plans to increase the interest rate. This raise would make credits more expensive and financing for businesses and private customers more expensive. The resulting drop in demand could cut off or at least slow down economic growth, which is why markets react nervously to such news. Additionally, higher interest rates make fixed deposit investments more attractive, which could reduce stock demand even more.
Traders with a news-based strategy will do better with a strategy that trades Fed with news binary options based on stock indices than with a strategy based on White House news.
Long-Term FX Investors Should Watch Spending
Trump made several promises to his supporters that, if they become law, promise great opportunities for long-term currency investors.
Promises such as tax cuts, increased military spending, and more infrastructure investments all increase government spending while simultaneously reducing income. If these plans come true, they would significantly increase the United States debt.
Increased debt is significant because it creates new money. When states borrow money, their central banks effectively create new money. The overall amount of money increases, which drives prices and leads to inflation. In the medium to long term, this inflation will devalue the U.S. Dollar compared to other currencies.
This prediction corresponds with Trump’s statements to devalue the Dollar to compete with China and Mexico. A devalued Dollar would make U.S. products cheaper in other countries but also products from other countries more expensive in the U.S.
In sum, traders know what to expect from Trump. The big question, once again, is whether Trump will follow through on his promises. At the moment, this is impossible to predict. Nonetheless, long-term investors should be careful before they invest in a rising Dollar. Monitor the government’s budget, and if it should run a big deficit, consider investing in a declining Dollar compared to a stable currency.
Binary Options Might Help You Beat Inflation
If Trump increased the deficit to cause inflation, stock indices would rise. Like any other product, stocks become more valuable during periods of inflation. If the price of an orange doubles in price, so doubles the price of a stock – even if the company has not improved its business.
The problem with stocks is that they do not necessarily mirror inflation because the economy is likely to worsen during inflation. When you invest $100 in an ETF based on the Dow Jones and a possible heavy inflation doubles consumer prices within the next five years, people would be able to buy less, and the Dow would fail to double, too. You might have more money, but you would be able to buy less. Effectively, you would have lost money.
When you recognize impending inflation, it makes sense to trade stock indices with binary options. Even if the Dow only increases in value by a few percent, long-term binary options can get you high payouts of 70 percent and more. This additional return outweighs the inflation and protects your money.
If inflation plans come true in the Trump era, long-term index traders should invest in rising stock indices.
Trump’s Deregulation Plans Might Benefit Binaries
U.S. traders are only legally allowed to sign up with brokers that have registered with the U.S. regulatory authority, the Commodity Futures Trading Commission (CFTC). This requirement limits U.S. brokers to Nadex, the only broker currently registered with the CFTC.
While Nadex is a great broker, being able to choose from as many competitors as possible is never a bad thing. Traders who want to execute a special strategy or take advantage of a unique promotion might do better with a broker overseas.
Trumps’ promise to deregulate banks might contain a deregulation of the binary options market, too. Of course, this is mere speculation. As anything with Trump, there is no telling what he will do. Deregulation however, is likely to benefit competition among brokers, and this should lead to better deals for traders – wherever they are based.
Focus On Short-Term Investments
The main characteristic of the Trump era is uncertainty. Nobody knows what will happen next. This uncertainty often leads to volatility.
Volatility suits binaries. While trades such as a boundary, or ‘no touch’ option can be used in flat markets, high / low and ladder options need price movement. So the uncertainty that the Trump administration is causing, provides many opportunities for short term trades.
With a new period of uncertainty taking hold in the UK, there are now few certainties in the global markets. Option such as ‘end of day’ or shorter, are an interesting way to take advantage, and increase trade volume.
Conclusion
The Trump presidency provides unique opportunities to binary options traders. Especially long-term investors, who can profit from the easily predictable effects of Trump’s proposed economic plans.
Expect rising stock prices, but understand that these prices might be caused by negative events such as inflation. Always consider what a decision means for the economy, the Dollar, and international relations. What is bad for the people might still cause markets to rise, and it would be a shame if you miss out on these developments.
In addition to monitoring important long-term developments, traders should focus on short-term investments to deal with the lack of stability. Binary options are the ideal type of investments for that.