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News Trading Example - ADP Employment Change

If you read my books, you may remember that in my opinion the ultimate edge that we may have in trading is the knowledge. You must know how the market is functioning, how the fundamentals affect the prices, how to analyze the charts, etc. The only thing that is constant is that the markets are always changing. If you don't know almost everything about them, eventually you will fail. If you know a lot about the trading, you may find much better opportunities than the other traders. Let me show you what I mean with a real trade example.

ADP numbers were published as usually at 1:15PM GMT. The Employment Change was 175K, worse than the forecast for 191K. Usually, worse than expected results should case a US Dollar sell off. This time it was different. USD/JPY jumped 20 pips just after the release. This currency pair is most sensitive to US economic data and is going up if they are good, or down if they are bad. Such big change of the price of the underlying asset drives the prices of the 5-minute binary options to their extreme levels. In this case a put option with expiry before 1:20 PM could be bought for 6 points. The payout is 100 points, so the max profit is 94 points. You can calculate the best risk/reward yourself. For me the profits are very important and I closed 1/2 of the position at 67.6. The rest expired in the money for 100 points payout.